In a surprisingly frank statement this morning, General Motors CEO Fritz Henderson confirmed that the Treasury Department is calling the shots on the company’s on-going restructuring. As reported by the New York Times, Henderson stated that GM was told by the Treasury Department to offer bondholders only up to 10 percent of GM’s equity in return for $27 billion of debt.
“They didn’t support us going above 10 percent,” Mr. Henderson said. “We went to the maximum that they permitted us.” Why 10 percent? According to Henderson, Treasury didn’t give a reason.
Washington’s control over GM isn’t too much a surprise — it’s been clear ever since Rick Wagoner was fired by the White House in favor of Henderson that the government was settling into the driver’s seat. But Henderson’s comments today provide unsettling confirmation of the degree to which Washington is now in control at the erstwhile private company.
No wonder the banks are scrambling to turn back their own TARP bailout money.