Citi and GM [View All]

[Joanne98]

posted by Adam Levitin

If I were a line-worker at GM, I’d be pretty pissed right now. My boss flew into DC on a private plane and came away with bupkes. Citi, on the other hand, just got a fourth big bailout. (Bailout 1: Bear Stearns; Bailout 2: AIG; Bailout 3: TARP preferred share investment; Bailout 4: the Citi-specific bailout. The first two bailouts propped up Citi and other financial institutions by protecting their counterparties.)

What’s most troubling about the GM non-bailout and the Citi bailout is the disparity in the moral hazard angle. It seems to me that from a moral hazard perspective (and I recognize that is not the end all and be all here), we have our bailouts exactly backwards.

http://www.creditslips.org/creditslips/2008/11/citi-and-gm.html#more