DURING SOME CRISIS, WEAKNESS IS A STRENGTH
As you may recall, poor Citibank had to keep lending to Donald Trump, when he ... got "overextended" in the early 1990s. There are plenty of other stories, too. Citibank had to keep lending to Brazil (and other parts of Latin America) in the 1980s, or face creating even worse troubles itself.
For now, we have to keep lending to GM, I would *guess*.
For one, the market would not take kindly to a massive unwinding of all the financial paper out there, I would *guess* (a lot depends on how that paper is set-up).
WALKING THE TALK
What's acute is that Paulson had backstopped money-market "deposits". That means a GM failure during the period could mean a draw on the Treasury. Maybe it is not that big, but it could be several billions, maybe tens of billions (but not hundreds) of dollars.
Is it known widely how many credit default swaps GMAC has written, if any. It's not disclosed in any financial statements (that I know), even if they have otherwise. (Ditto for GE capital).
Monday, October 13, 2008
A GM Bankruptcy - NO WAY
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