Under the agreement, which also involved 14 states and one tribal government, the company agreed to set aside $773 million to clean up the sites. According to the White House, the agreement will “give local communities the opportunity to participate in designing the strategy for repurposing these properties in accordance with their specific development objectives, using these funds to both properly clean them up and quickly return them to productive use creating jobs and restoring communities.”

Today, backed by that taxpayer largess, GM paid $3.5 billion to purchase a subprime lender, meaning GM will pay taxpayers back in part by selling them more cars at less advantageous interest rates. Plus, Felix Salmon notes, GM did not even get a good deal on the company: “[T]he government is now using taxpayer money to buy out AmeriCredit’s shareholders at a 24 percent premium to Wednesday’s closing price.”

The incident underscores how pointless the auto dealer carve-out in the financial regulatory reform bill is, as well. As a standalone company, in a matter of months, AmeriCredit would have come under the regulatory oversight of the new Consumer Financial Protection Bureau. CFPB regulators would have prevented it from using the industry’s worst practices — bait-and-switch scams, hiding fees and interest rates in the small print, selling unnecessary insurance products or offering subprime loans to prime-qualified customers. But, since GM bought AmeriCredit and will roll its services into the company’s auto dealerships, the CFPB will not be able to do so.

“This action will give our auto companies some long-overdue clarity, stability and predictability,” Obama said Tuesday in a speech at a General Motors plant in Lordstown, Ohio.

The new rules unify the Environmental Protection Agency’s goals to reduce the emissions from automobiles and the Department of Transportation’s rules on fuel economy. The proposed program will cover model years 2012 through 2016, increasing fleet-wide fuel economy by 5 percent per year. This means by 2016, the fleet-wide average would hit 35.5 miles per gallon, and would need to meet a new limit on emissions per gallon. The new rules will need to go through the traditional approval process before they are finalized, which needs to happen by March 2010. But the administration estimates that they will save 1.8 billion barrels of oil and reduce greenhouse gas emissions by nearly 950 million metric tons.

More importantly, it will be the Obama administration’s first action toward meeting its stated goals of reducing emissions and complying with the Supreme Court’s directive to the EPA to regulate greenhouse gases under the Clean Air Act.

The real question is whether the administration will follow through with its threat to move onto setting limits for stationary sources of carbon dioxide emissions, like power plants, refineries, and manufacturers. EPA Administrator Lisa Jackson declined to offer much information about their progress on that front at a press conference on Tuesday.

“EPA will continue to do it’s job, which is to respond to the now 2-plus-year old ruling about the Clean Air Act,” said Jackson. “I think it is fair to say that today’ announcement is path-breaking … It is the beginning of regulation. We should expect the EPA to continue to do its job.”

But she also made it clear that the administration would still prefer not to write the regulations. “I hope that doesn’t come to pass,” she said. “I believe that legislation is the preferable route.”

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[W]hen the federal General Services Administration announced this week that it had spent $287 million in stimulus money to buy 17,205 new cars, it turned out that the biggest beneficiary was the Ford Motor Company, the only one of Detroit’s Big Three automakers that has not received a government bailout.

The General Services Administration, which manages a fleet of 213,000 vehicles for some 75 federal agencies, said it spent $129 million to buy 7,924 Fords; $105 million on 6,348 General Motors vehicles; and $53 million on 2,993 Chryslers.

Like buying Verizon stock, then grabbing an iPhone.

The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain.

But US politicians dare not talk openly about industrial adjustment because the public does not want to hear about it. A strong constituency wants to preserve jobs and communities as they are, regardless of the public cost. Another equally powerful group wants to let markets work their will, regardless of the short-term social costs. Polls show most Americans are against bailing out GM, but if their own jobs were at stake I am sure they would have a different view.

So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow.

Beyond GM, an even bigger worry should be the continuing long loss of well-paying, middle-class jobs that once allowed significant numbers of Americans to share in the country’s prosperity, Reich said. The government bailout of GM, he wrote, will do little to address that problem — in fact, it will only worsen as the automaker cuts jobs to stay afloat for as long as possible. In this new economy, GM’s old adage has been turned upside down, according to Reich. What’s bad for GM these days is what’s bad for America as well.

This, then, is good news:

General Motors said Thursday that a key group representing many of its largest bondholders had accepted a proposal offering up to a 25 percent stake in exchange for not opposing G.M.’s reorganization plan.

In a regulatory filing, G.M. also filled out many of the details of the reorganization plan, crafted under the eye of the Treasury Department.

Under the terms of the deal, G.M.’s bondholders would receive a 10 percent stake in the newly reorganized carmaker. They will also receive warrants to buy an additional 15 percent of a new G.M. if the company rises to a certain level of value.

It’s really quite a bit better for all involved for this to proceed quickly. Given the complexities of the GM case, a swift turnaround is still not a sure thing, but this obviously helps.

What does this all mean? Well, it means that GM is headed for bankruptcy. The government will try to push for a speedy reorganization and sale, but the company is a big, complicated beast, and so a standard Chapter 11 process, taking several years, could instead be the result. It’s difficult to sell cars while in bankruptcy (one presumes), so  a protracted process could ultimately lead to liquidation — that is, selling off GM assets down to the last lugnut-affixing robot.

The main problem is that the government is providing the bulk of the bankruptcy financing (some $50 billion), which could give it as much as a 70 percent stake in the new automaker. This is tricky business. For one thing, it means that if the reorganized company doesn’t do well, the taxpayers take a big hit. It also means that the government has a big interest in keeping the reorganized firm afloat, which increases the likelihood of political meddling in the industry and continued cash infusions or subsidies. But the real rub is that GM’s obligations are large while its potentially successful sub-units are small. And those potentially successful sub-units will not be successful if they are saddled with too many of GM’s large obligations. So, for this to really work, the government has to swallow a lot of GM’s baggage and let free a new, trimmed down, unburdened GM. If that new company does well, the equity stake will have value and taxpayers will get back some or most of their investment. If it doesn’t — and in this economy, it will be swimming up a waterfall — then the government will have shelled out tens of billions of dollars just to prop up GM for a matter of months and delay the inevitable reallocation of workers and capital away from an utterly failed enterprise.

High risk, tiny chance of breaking even. What’s not to like?

The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said. [...]

Under the GM draft bankruptcy plan, the company would receive just short of $30 billion in additional federal loans, a source said.

The figure is a starting point in negotiations between the government and the company, the source said, and could change. A cash injection that large would boost the U.S. investment in GM to nearly $45 billion. The timing of the filing is also fluid, and could happen the first week of June.

The government previously indicated that it planned to take at least 50 percent of the restructured company, and likely would take the right to name members to its board of directors, as it has at Chrysler, where the government will control four of nine seats.

The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company’s labor costs.

General Motors Corp is recalling nearly 1.5 million Buick, Chevrolet, Oldsmobile and Pontiac mid-sized cars due to a potential leak of engine oil that could cause an engine fire.

The recall applies to the 1997-2003 Buick Regal; 1998-2003 Chevrolet Lumina, Monte Carlo and Impala; 1998-99 Oldsmobile Intrigue; and 1997-2003 Pontiac Grand Prix, GM said in a filing with the National Highway Traffic Safety Administration.

A total of 1,497,516 vehicles, all equipped with a 3.8 liter engine, are involved in the recall.

Yet the environmental goals of the program are quite modest. Although the White House press release on the subject claims that it will “prevent 26 million pounds of CO2 from entering the atmosphere,” it also states an “overall goal of at least a 10 percent increase in fuel-efficiency for the entire procurement.”

Studies have shown that 10 to 20 percent of a vehicle’s lifetime emissions come from its manufacture and disposal. If the government program results in the assembly of over 17,000 vehicles that are only 10 percent more efficient than those they are replacing, the overall effect is an increase in emissions.

The real impetus for this program, then, is to stimulate Detroit and help put the auto industry on a more eco-friendly path. The White House does not attempt to hide its aims; the press release states:

This accelerated GSA purchasing strategy is one component of the President’s overall commitment to supporting auto demand during this period of restructuring in the industry. Moving forward, the Administration will continue to work on several fronts to increase the flow of credit to auto consumers and dealers, and will work with Congress to pass an incentive program for people who turn in older, more fuel inefficient cars for cleaner cars.

Like a cash-for-clunkers program, this new fleet purchase is a small step toward a greener auto industry in the long term, even if its immediate effects are not as environmentally friendly as they appear.