Chapter Book

Incidentally, if it’s really the case, as Paul Krugman says, that “If the economy as a whole were in reasonably good shape and the credit markets were functioning, Chapter 11 would be the way to go” but trouble in the credit markets makes that impossible, I don’t understand why we can’t use federal funds to facilitate GM’s transition into Chapter 11 protection rather than a full-scale bailout designed to avoid bankruptcy.

Everyone says that part of the conditions of doing a bailout is going to have to be some major restructuring of this and that. But normally Chapter 11 bankruptcy is precisely the means through which such restructuring is done. If unusual circumstances mean we can’t do Chapter 11 and we need extraordinary congressional intervention, then it seems to me that the extraordinary intervention should be aimed at making Chapter 11 possible. Of course key GM stakeholders on both the management and the union side would prefer to avoid that scenario. But the reason they’d prefer to avoid it is precisely that they’d prefer to avoid major restructuring.