The news headline is “GMAC Holders Agree to Revised Swap Terms”, and the subtext is that GMAC finance has applied to be accepted as a bank and thus become eligible for TARP funds, but was denied because their capital structure was insufficient to meet banking status required for the conversion.
One reason they had not met that status was that bond holders had turned down an offer from GMAC to re-write the terms of the bonds. Bond-holders wanted a bigger piece of the pie.
With the choice by labor to decline to unilaterially reduce wages, I suspect GMAC’s offer to bond holders, and the likely prospect of getting TARP funding if GMAC achieves bank status, became more attactive.
There’s plenty I don’t know or care about in the auto industry bailout. As a detached observer, I note that the GOP’s position is that wages are too high, and that is a striking position in a deflationary environment in which home prices are deflating because they are overvalued relative to wages.
Perhaps US wages are too high, but if so, US asset prices are probably even more inflated than wages.
The US auto industry may need to balance jobs against wages but I think in the broader economy, any road to highest prosperity in the USA from here is one in which wages rise to a level that can support higher asset prices. Whether or not there is such a road, I don’t know, but if there isn’t, I suspect that means assets are even more overpriced than they currently appear, and the current economic paradigm is on even shakier ground. We’ve gone through 30 years in which median wages have stagnated, while asset prices and top bracket incomes and asset accumulations soared, and consumption was supported by bubbles and debt. I think the current downward spiral indicates that economic track is no longer sustainable and the way to move forward is to figure out how to support broader prosperity like the US auto industry did through the middle-half of last century – by passing productivity gains equally rather than siphoning them off through financial wizzardry.