President Obama uses New Math in GM Bailout  | |  Back in the 1960’s there was a time of New Math being taught in the schools. I remember my parents struggling to explain it to my younger brother. The rest of us had to memorize the basic addition and subtraction facts and the Multiplication Tables forward and backwards. My brother was taught the New Math and even had a tutor to help him. My parents were told not to make him learn the basic facts or the Multiplication Tables it would only confuse him.
It seems that President Obama has come up with some new math for the GM Bail Out. I was reading an AP story about the Bond Holder now wanting to settle with GM under the president’s plan. According to the story the Government would get 50% control of the company for forgiving $10 billion in debt, the United Auto Workers (UAW) would get 39% control for forgiving $20 billion in debt while the Bond Holders (whom the president and others have called greedy and self centered) would get 10% control for $27 Billion in debt. As I try to understand the New Obama Math it goes something like this:
1. 17.5% of the Debt= 50% Control of the Company
2. 35% of the Debt= 39% Control of the Company
3. 47% of the Debt= 10% Control of the Company
It might do the President well to be careful who he is calling greedy.
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| | | | | | 1.  melissaruth1 (3531) | 7 months ago |  Ha Ha I love your analogy. I remember my mom telling us about the new math when she went to school. I do not understand why he is favoring the auto workers union so much. They are the reasons these companies are failing, not the bond holders who actually lended these companies money, and held their awful debt. I do not think they are greedy to want what they are owed. The whole thing is a scam, and I like Obama but I really really disagree with the way he has handled the car companies.
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 bobmnu (2640) | 7 months ago | His view is that it is the workers that are the only ones that are important in the company. If you did not have workers then you would not have a company. He does not realize that they are only one part of the formula and they have the least risk in the company. The stock holders are taking the most risk while the bond holders have the most invested in the company and expect a fair return. In bankruptcy, the workers have been paid all along and have very little risk. The Bond holder has given money to the company and has only been paid interest on their money and could lose all or part of their investment if the company goes under. They have moderate risk and will paid first when the assets of the company are sold. The Stock holders have invested money that is unsecured and they have the most risk. As the company starts losing money the value of their stock decreases. If the company goes bankrupt the stock could be come worthless.
In bankruptcy the worker may be out of a job but they will be paid for most of their work and the government will pay them unemployment while they are looking for another job. The Bond holder who has $10,000 loaned to the company and has been receiving interest of 5% a year could lose their $10,000, but in most cases they will get a percent of what the company is worth. If the company is worth 10$10,000,000 and has $20,000,000 in debt the bond holders will get 50% of the value of the bond. The person who has $10,000 in stock will get nothing in the final settlement. Why should the worker who has the least risk get the most benefit? | |
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