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What About GM's Tax Losses?

"They are going to treat it as not a change of ownership, and how they get there is going to be very creative, but you can probably assume that something good will happen to the tax loss carry forward (because) the IRS has the administrative ability to characterize it favorably," Martin said, adding that no other party would have any reason to object. The Internal Revenue Service declined to comment.

The administration is also overriding precedent in the Chrysler bankruptcy, where the historic rights of secured creditors have been subjugated to unsecured claims. Typically, higher priority, secured claims are paid in full before unsecured, lower priority claims are paid.

A group of three Indiana pension and construction funds, which hold $42 million of the $6.9 billion in secured loans to the company, appealed that ruling to the Supreme Court, which on Monday issued a stay in the bankruptcy court's approval of the Chrysler sale to Fiat. It was not clear how quickly the Supreme Court would rule.

In the Chrysler case, "the secureds are taking a massive crushing," Coyne said. "It puts a new corollary to bankruptcy law, which is: 'The law is the law unless the government is a creditor.' "

The Chrysler reorganization also favors the retiree health care trust fund administered by the UAW, which would own 55% of the company. Fiat would own 20%, which could grow to 35%, while the U.S. and Canadian governments would hold the remainder.

During the May 31 briefing, a senior administration official said that secured banks in the GM bankruptcy "will receive a full recovery because they are amply secured, as distinct from the banks in Chrysler which were not fully secured." The argument is that the secured claims in the Chrysler case are not worth their full value without government intervention, Coyne says.

In trading shortly before noon, GM shares were up 32 cents to $1.53, while shares in Ford (F - Get Report) were down 6 cents to $6.32.
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