DealZone

In retrospect, GM CEO Rick Wagoner’s demise was perhaps the most inevitable twist in the autos overhaul saga to date. The chance that he would present a radical plan to Obama this week, one dramatic enough to save his job, was slim at best. A more shocking result, one clearly less viable for Obama, would have been to make a few more threatening noises and hand out the cash that the company so desperately needs without demanding a very public pound of flesh – a head, in this case.

With only another 60 days to effect a U-turn in defiance of a skidding market, former GM COO Fritz Henderson doesn’t have a lot of room to maneuver. It’s hardly enough time for Washington to have installed a new crash-test chief executive.

The Chrysler bailout story is more intriguing. The private-equity owned car maker has been given 30 days to do a deal with Fiat, which has in deal talks to date pledged somewhere around zero in financial support. If that price was too much for the Italian auto maker, they may think that the ticking of the clock could give them some leverage to squeeze a few billion out of either Chrysler’s private-equity owners or U.S. taxpayers.

While Fiat managers may feel like kids in a Hot Wheels factory, they should probably temper their enthusiasm. Giving a foreign car maker U.S. taxpayer dollars would probably be politically poisonous to Obama, leaving bankruptcy a more viable option for the private-equity venture.

Deals of the Day:

* Turkey’s Sabanci family is buying a 15.3 percent in German airline Air Berlin, scooping up part of Len Blavatnik’s stake, more than two months after the U.S. billionaire sold the holding.

Preliminary first-quarter data from Thomson Reuters on mergers and acquisitions (M&A) and capital markets are out. And unsurprisingly, spring has not sprung in investment banking, with the big exception of a record deluge of corporate bonds.

Fees across investment banking (M&A, loans, and debt and equity capital markets) halved, while fees for completed M&A topped that with a 68 percent fall. Overall announced M&A fell by a third, compared to the same period last year, to $444 billion.

And even that figure is flattered by two huge pharma deals, which bankers doubt will be followed by more of the same, and a flurry of bank bailouts.

The Wall Street Journal appears to have gotten hold of a rather disturbing AIG memo implying an unseemly threat that angry Americans will undoubtedly feel fits the crime. Unless those who had the audacity to accept bonuses start returning the money, names of bonus recipients will be handed out to the angry mob by New York’s attorney general. On the other hand, if enough people join the giveback, the names won’t be released.

In Washington, the Senate is looking increasingly less likely to vote any time soon on a measure to tax the offending bonuses out of existence. Public ire over the bonuses helped send a similar measure zipping through the House quicker than Treasury Secretary Timothy Geithner can say “too big to fail.”

The AIG memo could be seen as more evidence that the case against the bonuses is flimsy at best. Not that authorities have no right to make this kind of threat – but isn’t it kind of seedy that they think they have to?

So AIG is honoring its contracts using bailout money. Pundits, sputtering with rage that the corporate world engaged in contractual bonuses, are basically rehashing the argument about whether AIG should have been allowed to go bankrupt. After all, the government decided that allowing AIG to pay its bills was better for the world than letting it break or renegotiate its contracts.

French bank Societe Generale has gone public defending the fact that it got $11.9 billion in bailout funds from AIG. France’s third-biggest bank by market value said it had acted within its rights to call on AIG for cash. This speaks directly to the rationale for the bailout — if AIG had been allowed to fail, a global systemic collapse in payments would have followed.

Keep in mind, too, that if it had resisted paying the contractual bonuses, AIG likely would have been dragged into court, spent millions on legal fees, and then been forced to pay up anyway. However ludicrous the concept of a contractually guaranteed bonus may be, they were legally binding contracts.

Citigroup, which has received $45 billion of U.S. government funds since October, may have had its fill of taxpayer money.

Citi’s chairman thinks the bank does not need any more capital injections from the government and is confident that it will remain in private hands.

“No, I think actually, particularly with the latest conversion … Citi is actually one of the better capitalized banks in the world,” Richard Parsons told Reuters. He also brushed aside any prospect of the U.S. government nationalizing the bank.

Now that the government has yet again propped up the embattled insurer, Congress is hauling regulators over hot coals as they try to figure out what happened. Here are some highlights from testimony today:  

Senate Banking Committee Chairman Christopher Dodd:
“That we find ourselves in this situation at all, is in my mind, and in the minds of many of my constituents, quite frankly, sickening. …

“The lack of transparency and accountability in this process has been rather stunning. Throughout the entire fourth quarter last year, it was frankly never clear, who owned AIG, or who was in charge.” 

Potential buyers of a large AIG business could be the latest to get some “relief” under the $700 billion Troubled Asset Relief Program (TARP).

In approving a revised AIG rescue package, the government has also agreed to give potential bidders of the insurer’s assets at least a bit of what some of them have been clamouring for – access to capital.

AIG has received significant interest from buyers for its aircraft leasing unit, International Lease Finance Corp, Chief Restructuring Officer Paula Reynolds said.

You can almost hear the outrage machines coughing and spluttering to life in Congress. GM and Chrysler‘s latest bailout requests, though well telegraphed, will be reviewed by their own special branch of government – call it the Car Komintern, perhaps, since it took over from the Car Czar concept. But legislators who are concerned that they are being bullied into throwing good money after bad will have plenty to say about the nearly $22 billion in additional government loans the automakers say they need.

The sum is nearly $5 billion more than the automakers have already received from the Treasury. And despite having provided more detail on how the money is to be spent, the industry’s viability is intrinsically linked to economic recovery. There is no Car Czar, and there certainly is no Economy Fairy.

The Detroit Free Press argues that the automakers are being a whole lot more candid about what they plan to do with the funds than the banks were when they got bailed out. And politicians supporting the automaker rescue may be able to get a lot more mileage out of the dangers of bankrupting the Midwest labor force than Wall Street has gotten convincing America that bankers deserve subsidized golden parachutes and bonuses for running their companies into the ground.

When the U.S. government started handing out taxpayer dollars to banks under TARP last fall, hundreds of banks lined up. To many, government money was cheaper than the terms they were getting in private and public markets.

“That really, in effect for several months, put a lot of our discussions with issuers really on hold,” said John Duffy, CEO of investment bank KBW, which specializes in the financial services sector.

Now, the pendulum may be swinging away from the government.

The Obama administration has made it clear that the recipients of more capital will have to live under dictates on what they can and cannot do with the money — dividend restrictions, executive compensation caps and such.  

First Bill Perkins likened the architects of the $700 billion U.S. bailout to communists. Now the Houston-based venture capitalist is going after the capitalists.

In his latest full-page ad in the New York Times, Perkins raises a question about the propriety of Goldman Sachs buying the majority of Constellation Energy’s London-based commodities business.

“Question #1: Does anyone else find it troubling that a government bailed out bank (Goldman Sachs) is buying a European Energy Speculation Outfit? It’s your money!!!”