The "Cheaper" $21 Billion Option

Just another $21.6 billion should do it. That's the latest bailout figure General Motors and Chrysler came up with to keep their tottering operations alive, the business pages detail this morning. General Motors is requesting the lion's share, seeking $16.6 billion from the federal government, bringing the sum total it has requested to $30 billion. The Associated Press writes that GM says it needs the full $30 billion to weather the economic downturn. Even with a cash injection, GM would be forced to "cut 47,000 jobs worldwide and shutter five more U.S. factories in a massive restructuring plan." But it believes a slimmed-down GM can reach profitability in two years and pay back the loans by 2017. There's one small catch: It has to get the UAW to agree to the turnaround plan, the AP writes. For GM, the scalps to go are some well-known models. Plans include phasing out the Saturn line by 2012 and reducing the number of Pontiac models, the New York Times writes. "G.M. plans to cut its brands in half, to four: Chevrolet, Cadillac, Buick and GMC," the newspaper adds.

GM presented the federal handout as the cheapest way forward. "GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process," the Wall Street Journal writes. Chrysler CEO Bob Nardelli threatened that insolvency for both firms would "have a cataclysmic effect on the entire auto industry," with millions losing their jobs, Bloomberg reports. Still, the Obama administration yesterday would not rule out bankruptcy as one possibility for the firms.

It was a busy day for the Obama administration as the president signed into law the $787 billion stimulus package, a bill he hailed as the "most sweeping financial legislation enacted in the nation's history." He traveled halfway across the country to make it official at a bill-signing ceremony at a museum in Denver, the Washington Post writes. It was no doubt wise to get out of Washington, the NYT points out. Obama has received support for his stimulus package from a number of GOP governors, even as Republicans in Congress spurned the bill.

Meanwhile, all this political intrigue failed to revive the markets. The Dow tanked to lows previously seen in the dark days of last autumn as fears of more bank losses at home and abroad and worries over the future state of the auto sector triggered a massive sell-off, the NYT writes. The future of the global banking sector came into sharp focus this morning after Alan Greenspan told the Financial Times, "The US government may have to nationalize some banks on a temporary basis to fix the financial system and restore the flow of credit."

Securities and Exchange Commission enforcers may have nabbed somebody. The SEC charged Texas financier R. Allen Stanford with an $8 billion fraud on Tuesday, the WSJ reports. The commission alleges "in a civil complaint that he lured investors with promises of high returns on certificates of deposit but poured their money into a 'black box' of hard-to-trade assets." The Washington insider, cricket backer, and banker to Latin America's superwealthy allegedly duped his victims into an investment scheme that led investors to think they were buying easy-to-trade assets that were rated by a team of financial analysts. It is alleged that the bulk of the money was being poured "into real estate and private equity, and the investments were reviewed by only two people: Mr. Stanford and James M. Davis, the bank's chief financial officer and Mr. Stanford's onetime classmate at Baylor University," the newspaper writes. Back to the mother of all financial frauds now, as the WSJ reports in a separate article that the many accounting firms that were supposed to be watching over victimized Madoff investors' money could be legally liable.

John Malone to the rescue—there's a phrase Mel Karmazin probably hoped he'd never have to hear, but that's the reality for Sirius XM's CEO this morning after Liberty Media saved the foundering satellite radio network through a $530 million loan in exchange for a 40 percent stake in the company, reports BusinessWeek. It was, in the words of the WSJ, "classic Malone: squeezing attractive terms from a distressed company while also thwarting the advances of longtime opponent" Charles Ergin of the Dish Network. Once known as the "king of cable," Malone might just have transformed himself into the "satellite king." Today, he is "poised to hold sway over a stable of companies that use satellite technology to deliver TV, radio, and broadband to more than 37 million subscribers," writes BusinessWeek.

Google is facing an antitrust suit from an unlikely place—small Web site TradeComet.com, which operates a business search engine called Sourcetool. TradeComet alleges Google put pressure on its operations by raising the advertising rates it charged the company after discovering Sourcetool was a potential competitor to its own search services. TradeComet (which last year urged the Justice Department to block the now-stillborn Google-Yahoo search-advertising partnership) also contends Google offered one of its competitors, Business.com, preferential ad rates in order to further put pressure on TradeComet, the NYT reports. Google's other enemies (documented by Wired this month) will be watching developments with interest. 

Finally, enter the top man at the U.S. Postal Service into a fat-cat pay dispute. According to CNN, Postmaster General John E. Potter received $800,000 in total compensation a year ago, triggering howls of protest from critics who point out that Potter recently testified before Congress showing the postal service posted a $2.8 billion loss and might not be able to fulfill its six-day delivery mandate. But the agency's board of governors on Tuesday came to his defense, saying the pay is justified. "Even in these difficult times, the postmaster general continues to exhibit visionary leadership, effecting billions of dollars in cost reductions," said Carolyn Lewis Gallagher, the chairman of the agency's board of governors.