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Bloomberg reports that President Elect Barack Obama's transition team is taking a hard look at the possibility of a prepackaged bankruptcy for the Detroit's troubled automakers.

In a prepackaged filing, companies like General Motors (NYSE: GM) would head to the bankruptcy court with agreements already worked out with the major constituencies: workers, suppliers and lenders. Going in with a plan could cut down on some of the fear and uncertainty surrounding the filing and cut down on the time it would take for the company to work its way through the courts.

It's good to see that Obama is taking a sane, realistic approach to an auto industry bailout. There has been concern that the new administration would be too generous in the terms -- and stones will fly if a GM workout is done with anything other than a bankruptcy filing. Bloomberg adds that "the president-elect earlier urged Congress to approve as much as $50 billion to save automakers, using the model of Chrysler's bailout in 1979."

Right: because that one worked so well that they're coming back 30 years later -- billions in excess compensation later. It's true that the Chrysler loan was paid back quickly, but it allowed the company to buy time and not really confront any of the long-term problems that have proven to be its undoing.

Hopefully Obama will listen to his more conservative advisors and push for the bankruptcy option. It's the only one that makes sense.

In an attempt to cut costs, The New York Times Co. (NYSE: NYT) is folding Play, the quarterly sports magazine launched in February of 2006, as the weak economy and declining ad sales slam its stock price and threaten the future of its dividend.

The Wall Street Journal reports (subscription required) that the company explored a variety of options for making Play work, including cutting staff and going online-exclusive, but there was just no way to make the magazine profitable.

It's a shame for sports fans because, as you'd probably expect from The New York Times, it offered a level of intelligence and nuance that is rare in the world of sports writing. A few years ago, the concept might have had a better shot, but with the company's balance sheet the way it is, it's just not in a position to bleed cash on projects that might pan out well over the long-term.

As the stock price craters, you have to wonder at what point the company will become an attractive takeover target once the economy begins to turn around. But with a dual-class voting structure that puts one family in total control of the company's future, a deal seems unlikely even if it is in the best interests of shareholders.

Have you ever noticed that the people blaming the current economic mess on short sellers tend to be either A.) loud mouths who don't know what they talking about or B.) Failed CEOs turned corporate blame shifters looking for something -- anything -- to divert attention from their own miscues: people like Patrick Byrne and Dick Fuld.

In a post on his blog, Carl Icahn came up with an argument in support of short selling that I hadn't heard before:

In simplest terms, choosing not to buy a stock because you don't like the company is like refusing to be friends with a drunk. But shorting a stock is like sending a drunk into rehab. Many of these companies, drunk with money and neglectful of risk, should have been sent to rehab a long time ago.

It's possible that aggressive short-selling accompanied by a public campaign of red flags might have pushed companies like Lehman Bros. and Bear Stearns to take a look at their risk management policies before it was too late: Certainly Lehman might have avoided its fate if it had listened to David Einhorn's warnings about leverage instead of dismissing him as irrelevant and buying back huge amounts of stock.

After a meteoric rise followed by a swift decent into bankruptcy, Steve & Barry's caught a lifeline when Bay Harbour Management LLC agreed to purchase the company's assets back in August. Bay Harbour hoped to keep 150 of the company's 276 store open. But the sagging economy appears to have dashed those plans.

The Wall Street Journal reports (subscription required) the company "is set to announce this week it will go out of business, according to two people familiar with the situation." All 5,000 employees will be let go after the liquidation, and the company's brand will probably be sold for next to nothing and live on in a much reduced capacity. For example, I could see Wal-Mart (NYSE: WMT) acquiring the brand to bolster its value-oriented fashion proposition.

Talking about the seedy side of subprime lending at the height of the bubble seems redundant -- like talking about Jeffrey Dahmer's dark side. But a piece in BusinessWeek looks at an especially sleazy side of the industry: "Dozens of former brokers and wholesalers say the trading of sexual favors was so common that it came to be expected."

Wholesalers reportedly offered loan underwriters sexual favors in exchange for approving questionable mortgage applications.

The scenes described in the piece sounds like something straight out of the movie Boiler Room: brokers sitting in the middle of an office shredding some documents and altering others in plain view of their supervisors and harassment and termination for anyone who protested the illegality.

While there were scattered lawsuits and reports of impropriety while all this was happening, no one really paid attention to it until after the music had stopped. A huge portion of the homeowners who are currently facing foreclosure participated in some form of mortgage fraud that was condoned by industry insiders.

In October of 2004, Chris Swecker, former FBI Assistant Director of the Criminal Investigation Division, told House Financial Services Subcommittee on Housing and Community Opportunity that "The potential impact of mortgage fraud on financial institutions and the stock market is clear. If fraudulent practices become systemic within the mortgage industry and mortgage fraud is allowed to become unrestrained, it will ultimately place financial institutions at risk and have adverse effects on the stock market."

That's exactly what happened, but too much money was being made, and too many lap dances being given, for anyone to care.

Shares of JCPenney (NYSE: JCP) tumbled on Friday after the company reported a decline of more than 50% in third quarter profits, driven largely by extremely weak consumer spending.

Friday also marked the launch of the company's 2008 Christmas Campaign, which will aim to convince consumers that JCPenney offers products similar to those found at higher-end stores at much better prices. Recognizing that the market is weak and that the company's core value-oriented consumers are likely to be stingy, JCPenney is hoping to profit from the trading-down of people who would normally shop at stores like Macy's (NYSE: M) but are feelings strapped.

"It's going to be a real dogfight out there for the customer's dollar," chief marketing officer Mike Boylson told The Wall Street Journal (subscription required). "We need to take market share from somebody else."

Aeropostale (NYSE: ARO) has succeeded in doing just that in the teen apparel market, with its lower price points luring in former Abercrombie & Fitch (NYSE: ANF) loyalists.

The problem may be that the weak economy will lead to a highly promotional environment at all retailers, and the prestige associated brands like Macy's and Bloomingdales combined with big sales could prevent JCPenney from making inroads.

A survey of 800 registered voters conducted by Public Strategies found that 63% of Americans are "much more concerned" with the debate on executive compensation than they were a year ago and 33% are "somewhat more concerned."

Some 80% have an unfavorable opinion of the chief executives of big banks. What's amazing to me is that 20% don't! 89% want to see some sort of clawback provision to allow companies to recoup funds paid to executives whose firms later collapsed.

This would seem to provide Congress with all the mandate it needs to implement very stringent pay controls on the companies participating in the bailout. If the taxpayers are being asked to provide more than $700 billion to the banks and they want executive pay controls to be part of that, then what's the question? Any bank that doesn't need the money that badly is free to reject it. It's a win-win!

Any rational argument against imposing restrictions on executive pay went out the window when the bailout bill was passed.

If there was any doubt left that P. Diddy has one of the crassest, most tasteless -- and brilliant -- minds in the history of marketing, this latest stunt should put it to rest.

Next month, Diddy's new men's cologne "I am King" will hit stores, and the hip-hop mogul is hoping that it will resonate with the same people who voted for Barack Obama. "When you see Barack Obama, you see a strong, elegant black man and when people see my ad, it's almost like that's the trend," he told (subscription required) The Wall Street Journal. The paper adds that Diddy plans to promote the fragrance in a lunch he will hold in Los Angeles and on TV talk shows and link his new fragrance and Obama.

How wonderful. Diddy is hoping to capitalize on one of the most historic events in the history of this country to sell people 1.7 ounces of scented water for $100. Ads for the cologne feature a tuxedo-clad Diddy on the French Riviera aboard a yacht, on jet skis and on helicopters.

The commercial success of this cologne would speak volumes about the intelligence of the American consumer.

Yesterday, Peter Cohan asked the question, will General Motors (NYSE: GM) file for bankruptcy? He speculated that it could happen this week.

I'm not smart enough to speculate about a timeline, but I've been saying for as long as I can remember that, ultimately, General Motors will end up in bankruptcy. I've been trashed for that opinion, and while the company has steadfastly denied that bankruptcy is even a possibility, intelligent observers see it very differently.

The New York Times recently explored the issue of whether bankruptcy is the best option for the company, and hedge fund king William Ackman said that it is. He told Charlie Rose that a bailout is not the solution as long as the company is still operating outside of the bankruptcy court as that would mainly help GM's creditors who would be the ones really getting the taxpayers' money. "That's not a solution to the problem."

Bankruptcy is the best option for GM. The company's equity is worthless anyway, and a bankruptcy filing will give the company the opportunity to get rid of its debt. If the federal government wants to help GM's employees avoid a disastrous fate, they can do that with more leverage within the bankruptcy process.

With its stock price in the toilet, Lear (NYSE: LEA) Chairman and CEO Robert Rossiter bought about $400,000 worth of stock.

That, and the fact that The Wall Street Journal picked up (subscription required) the story was enough to drive the stock up nearly 25% today on no other news. But here's a newsflash: the PR value of the purchase far exceeds the actual value of the investment -- $400,000 worth of insider buying drove the company's market cap up more than $20 million. Other insiders have since followed suit and purchased token amounts of stock: the CFO and the president of global seating systems,

Making me even more skeptical of the situation, Rossiter told the Journal that "The stock is so undervalued, it's unbelievable."

Rossiter is milking this transaction for all the positive publicity he can get -- something that Lear has been sorely lacking for a long time.

Orchestrated insider buying accompanied by media interviews makes me skeptical, and investors are better off focusing on the real story: even after these high profile buys, Mr. Rossiter still owns well under 1% of the company's stock. That's hardly a vote of confidence.

There's plenty of scandal surrounding American Apparel (AMEX: APP) since it went public but, up until now, it's consisted almost exclusively of hallegations of bizarre sexual conduct by the company's founder and CEO Dov Charney.

But a new lawsuit tosses the American Apparel quandary into a whole new category. Roberto Hernandez, a former accountant at the company, is suing (subscription required) for wrongful termination alleging that, in 2006, Charney "demanded that Mr. Hernandez pad the inventory" in attempt to make the company appear more attractive to investors. Hernandez says that he "refused to participate in any scheme to potentially defraud the investors" and was fired on November 9th of that year.

This is second time this month that American Apparel has come under fire over allegations that it sought to mislead investors. On November 4th, I wrote about a lawsuit accusing the company of asking an alleged victim of sexual harassment to participate in an arbitration hearing with a predetermined outcome -- and then plotting to issue a press release declaring victory in the sham hearing.

Here's the question: With American Apparel's stock beaten down so badly in spite of incredibly impressive sales growth, does any of this really matter? Up until now, you might have been able to say that it doesn't. But many investors will want to steer clear of a company with a lawsuit accusing the company's CEO of directing an accountant to cook the books.

The shares fell yesterday after the company reported earnings that were down sharply because of stock-based compensation expenses.

UPDATE: This morning American Apparel released a statement in response to the lawsuit and media reports, calling it a "frivolous and baseless lawsuit recently filed by a disgruntled former employee." The company added that "It is unfortunate that the media continues to focus on sideshows and false allegations. It does a disservice to the 10,000 men and women who make American Apparel such an outstanding company; to our customers who love our products; and to our investors who appreciate our strong financial performance and our dedication to being a leading public company."

Congressional Democrats called on the Treasury Department to extend the $700 billion bailouts of banks to include the struggling auto industry. Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi wrote to Treasury Secretary Hank Paulson, saying that "We left the meetings convinced that our nation's automobile industry – the heart of our manufacturing sector – and the jobs of tens of thousands of Americans are at risk".

The problem is that using taxpayer money to protect jobs in an industry that has essentially no hope of ever being profitable again is not a good deal. Here's what Time had to say about bailing out the auto industry back in 1979:

The congressional debate will resurrect all the arguments for and against giving federal aid to any company. There is a strong case that such help rewards failure and penalizes success, puts a dull edge on competition, is unfair to an ailing company's competitors and their shareholders, and inexorably leads the Government deeper into private business. Why should a huge company be bailed out, say critics, while thousands of smaller firms suffer bankruptcy every year?

That was when we bailed out Chrysler -- and now, hundreds of millions in bonuses and golden parachutes later, they're baacccccckkkk! And what of the rest of these bozos? General Motors (NYSE: GM) should have seen the writing on the wall a long time ago. Instead, the company continued to pay huge dividends as recently as this summer. As long as the company and the industry at large are being run by people as incompetent as those currently in charge, there is absolutely no way they should be trusted with another nickel of taxpayer money.

On the other hand, the $700 billion bailout of Wall Street pretty much eliminated any principled argument against a bailout of Detroit. But as we were told when we were kids, two travesties don't make sound fiscal policy.

The death spiral of once proud electronics retailer Circuit City Stores (NYSE: CC) is now complete.

In a press release issued this morning, the Richmond, Virginia company announced that it had filed for Chapter 11 bankruptcy protection. There had been some speculation that Circuit City would put off a filing until after the holiday season, but the company's inability to convince suppliers to ship merchandise made that impossible:

Faced with the need to secure ongoing vendor support and to ensure adequate merchandise flow to stores during the important holiday season, the company has determined that it would be in the best interest of its stakeholders to file for reorganization relief under Chapter 11. Operating under the protection of Chapter 11 will provide the company's vendors with assurances that they will be paid for merchandise the company receives post-filing so the company can be sufficiently stocked for the holiday selling season.

The stock is trading in the 12-cent per share range, down from a 52-week high of $8.24. Back in 2006, the company's stock traded as high as $30 per share. In 2000, the shares briefly traded at more than $50 per share.

The company had already announced plans to shutter 155 domestic stores, and no additional closings have been announced. Circuit City has secured $1.1 billion in debtor-in-possession financing that will allow it to continue its operations.

Shares of Best Buy (NASDAQ: BBY) are trading up about 5% as investors anticipate an opportunity for sizable market share gains as a result of the demise of the company's biggest competitor.

The taxpayer-funded bailout of American International Group (NYSE: AIG) just wasn't rich enough at $123 billion. Oh, and the terms for repayment were just a little bit too tough apparently.

The Wall Street Journal reports (subscription required) that the company has reached a deal with the government to replace that package with a new $150 billion plan. Here's the quick summary: "Under the terms ironed out late Sunday, the government would give AIG more money, including $40 billion from the U.S. Treasury's $700 billion Troubled Asset Relief Program. It would also receive less interest than on the bulk of the original loan, while freeing AIG from exposure to some of the risky financial instruments that nearly caused it to file for bankruptcy protection."

Wow. The government will not be increasing its stake in the company beyond the 79.9% it acquired in the original deal. The original $85 billion, two-year loan will be replaced with a five-year $60 billion loan -- with an interest rate that's 5.5% lower at LIBOR plus 3 instead of LIBOR plus 5.5.

What is difficult for me to understand is why the company's common stock holders are being allowed to retain any interest. Without the government, the company would surely have plunged into bankruptcy now and shareholders would have been wiped out. If saving AIG at the expense of taxpayers is necessary for the health of the financial system, I understand. But why does the bailout have to stuff cash into the pockets of stock market speculators? That's wrong. If the market for the distressed assets we're buying doesn't improve, taxpayers could stand to lose billions of dollars. It just seems obvious that a situation so desperate that it requires the Treasury to speculate on obscure securities shouldn't also provide an opportunity for shareholders to make billions.

Grand Canyon Education Inc. will end the four-month IPO drought when it goes public this month. According to The Wall Street Journal (subscription required), "The company plans to sell 10.5 million shares at a price between $16 and $18, $2 lower than originally planned, and will list on the Nasdaq Stock Market under the symbol LOPE. Credit Suisse Group and Merrill Lynch & Co. are the lead underwriters. The deal is expected to begin trading Nov. 20."

Grand Canyon Education Inc. was formed when Grand Canyon University, then a struggling public college, was taken private by Significant Education LLC in January of 2004. The school's roots go back to 1949 when it was established as a Christian university by the Arizona Southern Baptists. The school's list of notable alumni is mainly athletes: former Major League Baseball players Tim Salmon and Chad Curtis, along with Ultimate Fighter Efrain Escudero.

The company may be adversely effected by tightening in the student loan market, which is likely to have a disproportionate effect on for-profit colleges. On the other hand, economic woes may inspire more workers to go back to school to seek more specialized training. So far shares of for-profit college operators like DeVry Inc. (NYSE: DV) and Apollo Group Inc. (NASDAQ: APOL) have held up extremely well in comparison to the broader market.

For more information, read the registration statement here.