Washington will almost certainly cave in to GM’s extortion. They always have and always will.

So, how was the trolley ride to work today? Were you able to get a seat, or did you have to hang onto a strap?

What, there are no trolleys where you live? Instead, you spent an hour and a half grinding through gridlock in your car? Yeah, me too.

That’s because there are virtually no trolley lines left. Seems that someone bought them up and scrapped them all. Now who would do such a thing?

Actually, General Motors (GM:NYSE) would, which has a great deal to do with why I am inclined to consign the bankrupt beggars to rot in corporate hell.

Trolley Dodging

Dial your “Way Back Machine” to 1937: Trolley lines happily and efficiently serve most every major metropolis. Heck, my own hometown baseball team, the Brooklyn Dodgers, draws its name from agile street crossers trying to avoid death by tram.

Suddenly, an odd company named National City Lines (NCL) pops up out of nowhere like an evil mushroom. Operated by five brothers named Fitzgerald, these nigh-illiterate Minnesota bus drivers have somehow gotten a hold of millions of dollars and are buying up every trolley company they can get their greasy hands on.

Eventually their network of shell companies and subsidiaries owns transit companies in some 40 cities. So what do they do with these fast, clean, effective, cheap “light rail” operations? They tear up the tracks, sell the cars for scrap, and replace them all with slow-moving, smoke-belching, rubber-tired buses. And then they raise all the fares.

Birth of an Eventually Bankrupt Nation

So you know what folks did? They bought cars. Lots and lots of cars, which require lots and lots of concrete roads, and lots and lots of gas stations and lots and lots of garages to put them in, and two-income families to pay for it all.

In other words: modern, gridlocked, unhappy, bankrupt America.

As I said earlier, who would want to do such a thing?

GM would, along with Mack Truck, Phillips Petroleum (a.k.a. ConocoPhillips [COP: NYSE]), Standard Oil (a.k.a. Exxon Mobil [XOM: NYSE]), and Firestone Tires (now Japan’s Bridgestone-Firestone [BRDCY.PK] after the whole melting tires/SUVs blowing up/people getting injured debacle).

You Can’t Make Up Stuff Like This

No, this is not some fevered anti-industrialist dream. In 1946, the FBI caught wind of the whole sordid affair, and in ’47, the bunch of them were caught and hauled into federal court on charges of criminal conspiracy.

Here’s what the G-men uncovered: The four corporate giants paid millions (in current dollars, billions) for NCL preferred stock. NCL used the cash to buy and destroy trolley lines, and replace them with buses sporting GM chassis, Mack engines, and Firestone tires, to be fueled by Esso Diesel.

And the best part? Trolleys running on smooth steel rails last decades, while these new buses were guaranteed to shake themselves apart in a few years. Now that’s an eternal stream of income if there ever was one.

It’s also sorta, kinda, you know, “illegal?” So on April 1, 1949, the judge handed out a verdict: Mack, Firestone and GM would each pay $5,000. Esso only owed a grand. And each Fitzgerald brother was forced to pony up a dollar. And allowed (one might say even encouraged) to continue buying and closing trolley lines. After all, what’s good for General Motors… is certainly good enough for the likes of us.

Buy the Cars… Don’t Buy the Cars… It Matters Not, Because We Still Foot the Bill

Now we get back into our time machine and journey back to the present: After decades of filling the highways with god-awful cars that seldom outlast their payments, Americans are done with GM. Just don’t want one this year, thank you very much.

GM’s outraged reaction: If you won’t buy our cars, fine! Just give us $50 billion in cash (for now; we will probably ask for a lot more again in a few weeks). If you do that, we will still close down plants and fire a boatload of workers.

But if you don’t, we will declare bankruptcy, which would cost you $100 billion up front, and God only knows what else, when we start firing millions of workers and shutting down supply lines to every other manufacturer.

Oh, and those billions you already lent us? Fergedaboudit! Our buddies with bonds are waaay ahead of you in line. Wanna argue about it? Take us to court (’cause we looove the courts)!

Once a Thug, Always a Thug

My emotional response is that this is blackmail, plain and simple, and I am, as I said earlier, inclined to let the crooks rot.

However, I suspect that, just as they did in 1949, GM will once again get a free pass to continue making our lives miserable. Oh, they will be “restructured,” with “brands” that were once independent operations, but haven’t had any real meaning in decades, finally fading into the night.

But in the end, we will comply with their blackmail, and write this check, and the next one. And the next one.

Other Related Topics: Bank Bailout , Editor Adam Lass , General Motors , WaveStrength Options Weekly

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