Kid glove treatment they may get, while the auto manufacturers are slapped around. But the financial services sector remains insolvent, floating along in a sea of liquidity courtesy of the Fed and Treasury.
Personally, I'd like to see the TARP recipients treated like Chrysler and General Motors. But that's at least six months off. Of course, the more public money gets poured into them, and the more blatently imprudent their accounting becomes, the greater the baying for blood at the end of the day.
I also think that at least, with respect to Chrysler and General Motors, the federal government has a point of view, that is developing into a program, that will probably work. It will work because the resources are available to make it work. It will work because with a new capital structure the enterprises are viable because at a new price point their products are attractive.
The mechanics of a out-of-court cramdown are elusive. But a prepackaged federally backed reorganization with judicial blessing, out of which something that looks a great deal more like a German car company is the most likely result, at this point. That's assuming that the equity is wiped out, the debt takes a huge haircut, and all the pension liabilities are somewhow assumed by the federal government.
Meanwhile, the damage continues to grow on Wall Street.
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