Park that bailout
There seems to be a myth that bankruptcy for the (former) Big Three would spell Armageddon. Not true.
It is getting harder lately for companies to reemerge from Chapter 11, true. For example, this year Circuit City and Linen N’ Things were forced to liquidate when they couldn’t find a white knight. Such a Chapter 11-is-the-new-9-scenario could be especially disastrous if the autos went under, and would drag their suppliers under the bus too. We can and should avoid this.
But giving a company like GM a blank check just because its CEO Rick Wagoner has ditched his jet and gone to Quiznos, well that’s a recipe for disaster as well.
There is another way. The government could sponsor the automaker’s bankruptcy. This way they win more concessions than with a bailout. Andrew Ross Sorkin lays out the plan.
“Taxpayers shouldn’t fork over a cent until shareholders are wiped out, management is tossed out and the industry is completely reorganized,” he wrote.
What say you all?