This morning the administration announced that it was lending the industry up to some $17 billion. In return they did achieve some concessions, but they did not go far enough in my opinion.

Who cares about private jets and executive compensation? These are nonsensical issues that have little bearing on the survival of the industry or the return on investment that the government receives for its effort.

We Let Them Off The Hook!

What taxpayers needed was an equity stake and not just some equity, but all of it. How the Government did not succeed in negotiating any equity is beyond me.

Instead, as taxpayers, we are not only giving away money, but we are letting the automakers off the hook. I’m not trying to be a hard hat here, but seriously. This deal stinks for taxpayers.

No wonder then that shares of both General Motors (GM) and Ford (F) are trading higher on the news. The bailout may very well ensure that the one stakeholder that should get wiped out in this deal remains in play.

Well maybe not. The loan does require that the auto makers reduce debt by two-thirds in return for equity. Given the large amount of debt outstanding such a move will be very dilutive to equity holders.

That apparently doesn’t bother current equity holders. Survival trumps dilution I guess.

Thanks to the surprising leniency of the administration in charge of the war chest, current equity holders have been given a reprieve. Although bankruptcy and failure are still in play here, the complete wipeout of equity in return for capital looks to be off the table.

What will the new administration do? Chances are they will be even more lenient than the current administration. That means dollars will flow continuously until the problem is solved without damaging current equity positions.

How Will the Auto Bailout Play Out?

It would appear that General Motors and Ford will survive this crisis. That said, it is nearly impossible to value that equity given all of the moving parts. The big question will be the dilution from debt conversion.

I suspect further haircuts in value will be forthcoming. If you are long the stock you may as well hold on. If you are trading the stock, look for shares to continue moving sharply in either direction.

Otherwise, I would wait for a better price.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com.