Treasury advisers ponder ways to fund GM, Chrysler bankruptcy

Advisers to the U.S. Treasury are exploring how the government might fund a bankruptcy at General Motors Corp. or Chrysler LLC.
But the efforts do not reflect any decisions about the industry's future, an Obama administration official said Monday.
The Wall Street Journal reported outside firms were trying to arrange as much as $40 billion in financing for Detroit's GM and Chrysler, which is owned by New York's Cerberus Capital Management LP. Administration officials told the Journal they are trying to find a way to restructure the two companies without resorting to bankruptcy and that the latest efforts are "due diligence."
Such money, known as debtor in possession financing, keeps bankrupt companies operating in return for ownership stakes or first claims on any future profits. The Journal said a $40 billion loan would be five times larger than the previous record for DIP financing and that several banks had reservations about such a plan.
The administration official told the Free Press the government had to explore all possible options as part of the review of GM and Auburn Hills-based Chrysler's request for $21.6 billion in additional aid.


source: http://www.lansingstatejournal.com/article/20090224/NEWS03/902240312/1004/NEWS03

The problem of GM and Chrysler has happened for long time (Those companies has been fund for decades), but the government still funding the bankrupt companies is against the principle of free market economy. If the government is still going to fund GM and Chrysler, the tax payer will pay more tax for funding the profit-maximizing firms. If those companies cannot resolve their lose, the government would be in trouble because more bankrupt companies would request fund from the government.