Government Tells GM To Ready For Bankruptcy

According to the NY Times, "The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court." President Obama's auto task force, which is continuing talks with GM, wants to make sure a "bankruptcy filing is ready should the company" in case they cannot work out a deal with bondholders to "exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders." The Times reports that one idea is to create a company that buys the "good assets" of a bankrupt GM, which lost nearly $31 billion last year (and received $13.4 billion in federal aid), while the "bad assets" are liquidated. This news is currently dragging Dow futures down.