Yeah, but the reason the bondholders were unhappy (as anamax said) is that it officially sanctions this sort of malfeasance, and therefore makes the bond market more risky.
But it's certainly true that equity holders came out quite a bit richer than they otherwise would have. Owners of common stock are last in line in a liquidation, so they likely would have gotten very little. But now they've got more equity than at the time of the bailout.
Thus, the government pumped taxpayer money into GM shareholders.
In the bankruptcy, the Motors Liquidation Company purchased all the valuable assets (including the names and trademarks) from GM. The proceeds were (and are still being) used to pay bondholders and other creditors. Anything remaining would be given to shareholders, but the proceeds of the sale are not expected to be even close to sufficient for this to occur (that's why GM went bankrupt to begin with).
http://en.wikipedia.org/wiki/General_Motors_Chapter_11_reorg...
CWuestfield and I were discussing actions taken by the government during the bailout, not a business plan the UAW and GM entered into in the 60's.
During the bailout, the administration funneled billions of taxpayer dollars (many of which were paid by people earning less than UAW employees) to the UAW. In the process, they also screwed over bondholders (and ignored the rule of law) who had a legitimate claim to part of the proceeds of GM's liquidation.
That's an example of the government screwing over the rich (and middle class) for the benefit of the upper middle class.