Government Motors

Uncle Sam will be calling the shots at General Motors (GM). Today's business press lead with the story of GM's significant restructuring plan that gives the U.S. government as much as 70 percent of the ailing automaker after the union walked away from the bargaining table with less than initially envisioned. According to the Wall Street Journal, "the union's health-care trust would own 17.5% of a reorganized GM, in exchange for retiree health-care concessions." It was initially discussed that the UAW would get roughly 30 percent of GM, the newspaper adds. The government's plan would also mean secured lenders Citigroup (C) and JPMorgan Chase (JPM) would be paid off in full the roughly $6 billion they are owed.

The New York Times breaks down the numbers, reporting that the Treasury Department will inject $50 billion into GM "to get the company through Chapter 11." That is on top of the $20 billion already doled out, the newspaper calculates, adding that the firm's iconic initials may very well be known from here on in as "Government Motors," a far cry from its old nickname: "Generous Motors." According to the Detroit Free Press, the deal enables the government to now negotiate with the rest of GM's bondholders who are still owed $27 billion. They probably will only get about 10 percent of what they are owed, the newspaper speculates.

What does a $200 million investment in Facebook land you? Oh, 1.96 percent of the social networking site—no more, no less, the NYT writes. Maybe a better question is: Who would make such a questionable investment? The answer: Russian investment firm Digital Sky Technologies, in a move that cued up a little fun for headline writers yesterday. Business Week couldn't resist with its "From Russia With Love" crack, adding that the deal values Facebook—all jokes aside—at $10 billion. Business Week is quick to note that Microsoft  (MSFT) paid $240 million in 2007 for the equivalent of a 1.6 percent stake, a deal that valued Facebook at a stratospheric $15 billion. Never mind that. Breakingviews says don't be fooled by Facebook's $10 billion valuation line. "While that may represent a target valuation for Facebook, the actual worth, today, of Mark Zuckerberg's dorm room creation may be much lower," it writes.

A large chunk of the subprime and other nontraditional mortgages that are being modified to stave off mass foreclosures will likely still end up delinquent within 12 months, the Los Angeles Times reports. That's the conclusion of a new Fitch Ratings study that looked at the subprime mortgages, jumbo loans and other unconventional bank loans  Wall Street mass-bundled into securitized products. It projects that "55% to 65% of these loans that are being reworked to avoid foreclosures may end up at least 60 days delinquent anyway within 12 months [while for subprime loans] the projected 60-day delinquent rate was 65% to 75%." The downbeat report comes just as regulators, along with the Obama administration's $75 billion Making Home Affordable program, press ahead with efforts to get mortgage terms modified. Still in housing markets, don't bank on your home bouncing back as an investment asset anytime soon. House prices in 20 major metropolitan areas dropped by 18.7 percent in March compared with the same month a year ago, the NYT reports, citing the latest Standard & Poor's Case Shiller Home Price Index. Where there is real action is at the bottom of the market. There, "investors armed with cash and first-time buyers equipped with tax breaks compete for foreclosed properties," the NYT writes.

Spanish financial services giant Banco Santander has become the first of Bernie Madoff's so-called feeder funds to make a payment to the trustee of the Madoff firm. The WSJ reports that Santander will pay $235 million to settle potential legal claims by trustee Irving Picard of Baker & Hostetler. The amount is 85 percent of what Picard said he would have sought in court from Santander's investment fund, Optimal Investment Services SA, which now means that Picard has $1.2 billion for Madoff investors. According to Picard's investigation, Optimal had no knowledge of fraud by Mr. Madoff.

Finally, CitiGroup and Bank of America are plotting how to reward staff with lavish compensation packages even as Washington puts pressure on the bailed-out banks to reduce bonuses. How will they do it? By simply raising base salaries, the WSJ reports, citing people in the know. Morgan Stanley (MS) has already pushed through its own compensation restructuring. And it's not likely to end there. "I think eventually J.P. Morgan and Goldman Sachs will need to adopt the same changes to compensation," a compensation consultant tells the newspaper.