Two weeks ago, reports had Barack Obama leaning towards bankruptcy for GM as a solution to their problem — after soaking taxpayers for $14 billion just a few months earlier.  Today, the New York Times reports that GM has prepared a “surgical” bankruptcy, apparently hoping for a debt-ectomy.  Don’t worry about the waste, though, because the taxpayers will receive a transplant of all the cancerous liabilities that crashed the automaker, and it’s the government pushing that solution:

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.

Members of President Obama’s automotive task force spent last week in meetings and on conference calls with G.M. officials and its advisers in Detroit and Washington. Those talks are expected to continue this week.

The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.

But pay attention to the actual “surgery”:

One plan under consideration would create a new company that would buy the “good” assets of G.M. almost immediately after the carmaker files for bankruptcy.

Less desirable assets, including unwanted brands, factories and health care obligations, would be left in the old company, which could be liquidated over several years.

Treasury officials are examining one potential outcome in which the “good G.M.” enters and exits bankruptcy protection in as little as two weeks, using $5 billion to $7 billion in federal financing, a person who had been briefed on the prospect said last week.

The rest of G.M. may require as much as $70 billion in government financing, and possibly more to resolve the health care obligations and the liquidation of the factories, according to legal experts and federal officials.

Basically, this is a shell game.  GM’s investors get to buy up all the good assets, while dumping the rest into the corpse of GM.  Once that happens, the taxpayers will be on the hook for those toxic liabilities, adding another $70 billion or more to our existing entitlement liabilities, only on the terms of the pensions negotiated privately.  Even getting off the hook will gain GM’s investors an extra $7 billion in taxpayer cash.

Sweet deal … for them.  For each American family, that will cost $1000, or a good down payment on a car.

I suspected that any real resolution to this would require restructuring of GM’s pension obligations.  I didn’t expect that we would have to completely underwrite them.  That’s absurd.  We’d be better off allowing GM to fail on normal bankruptcy terms.  Will even a healthy GM add back $77 billion back into taxpayer pockets, let alone cover the $14 billion they’ve already wasted?