With Auto Bailout Failing.....A Brilliant Plan!

With time running out for GM and Chrysler it looks like the Senate is going to block the $14 billion bailout plan.  It seems that just like she did with the TARP, Nancy Pelosi may have done it again by stating that she won't bring the House back to vote on any alternative plan.  Way to go Ms. Smarty Pants.  There are probably at least three senators who won't vote for the package now for no other reason than to tell Madame Speaker to stick it!

I can't believe Hank Paulson, a product of the world of high finance, can't see the very simple solution that is right in front of his face.  Congress won't let the government lend Detroit the money.  Congress and Hank Paulson don't want to give Detroit the money from TARP.  Lets use some financial engineering for goodness sake!

1. Wells Fargo and JPM Chase create a Special Investment Vehicle ("SIV") called "Motor City".
2. Both banks contribute $3.5 billion of equity that they obtained from the TARP into the Motor City SIV.
3. Moody's and S&P rate Motor City commercial paper A-1/P-1
4. Motor City sells $7 billion in commercial paper to the Fed's new commercial paper facility, the CPFF.
5. Motor City SIV then lends the total $14 billion of funds to GM and Chrysler at Libor + 4%

Problem solved!

Comments

[RPB]

Nice call Harry, don't quit your day job.