My understanding was that the "loans" to these companies were secured with equity so that upon default the Federal government could liquidate the companies assets to recoup the amount of the loans.
GM and Chrysler had to provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price. Had those companies gone into total bankruptcy, those stocks and warrants would have not been worth a penny making the government nothing more than an unsecured creditor. When these terms and conditions were questioned by some in power, it was then that the U.S. Treasury revised the terms of the "loans" where part of the "loans" were supposedly "secured" by assets not already promised to other entities with the balance of the "loans" "secured"
against assets that HAD been already promised to other entities
who had already placed liens against some of the auto companies that were given bailout money!
Giving bailout money under theses terms and conditions is like giving someone a home equity loan or a line of credit when that someone has an upside down mortgage with all kinds liens against their home or property.
The government took a very high risk, with
OUR tax dollars, in the way that they provided these companies with "loans" to bail them out.
