Why we shouldn't bail out GM -- from a liberal
Brad DeLong says GM and other nonfinancial companies stay in business even in Chapter 11 proceedings. Banks don't; hence the need to bail banks out. Unfortunately, banks are doing a great imitation of being out of business even though they got the bailout and their doors are still open.
We don't like to let financial firms go bankrupt because bankruptcy shuts down their business. Buying and selling financial assets is what they do, and bankruptcy requires that financial claims be largely frozen while the court sorts it out.By contrast, there is no good reason not to let non-financial businesses go into chapter 11. They keep running--as businesses--and emerge from bankruptcy or do not.
I understand that the argument "you saved X from bankruptcy, why won't you save GM from bankruptcy?" is very hard to deal with in a soundbite. And I believe the federal government has an obligation to autoworkers and retirees. But this obligation is not well-exercised by keeping GM out of bankruptcy.
Maybe you could call it "conservatorship" or something?
Comments
The Big 3 are in immediate danger only because the credit crunch (and generalized fear) has crashed auto sales (and that also hit Toyota and Honda).
So the real question is "should we try to save companies being crushed by the credit crunch?"
Posted by: save_the_rustbelt | November 13, 2008 2:06 PM
No one is bailing out Honda and Toyota. GM & Co. should take a long hard look in the mirror and adjust their business to be able to survive in modern economy.
Pure and simple truth is that they produce expensive products with poor quality (for most part). There is only that much consumers will tolerate because of the patriotism or brand loyalty.
Typewriter makers also had to shut down their business at some point. That's just life.
Posted by: Jelena | November 13, 2008 2:38 PM
NO LOANS – BUT DON’T KILL THE HEARTLAND
It depends on HOW a bailout is structured, but one should be attempted.
BAILOUTS ARE COMPLEX BEASTS, but Try something outside the box like this to save the U.S. Auto Industry - - -
http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html
Toyota and Honda also depend on the same suppliers who feed GM and FORD. No need to let “Detroit” disappear.
There is also much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW.
Posted by: PacificGatePost | November 13, 2008 11:59 PM