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With or Without You
...The prospect of an ever-increasing supply of tax dollars is leading parties with auto industry contracts — unions, bondholders, dealers and others — to play a game of chicken. No one wants to renegotiate a contract when they think the government will come in with more money to cover the losses. And the Obama administration, as with AIG, does not have the power of a bankruptcy court to discharge debt.

Allowing the companies to go into bankruptcy is what should have been done from the start. As with multiple businesses such as airlines that have succesfully emerged from Chapter 11 bankruptcy, debts could be discharged and the companies could be restructured in bankruptcy court.

To say that consumers would be discouraged at buying a car in bankruptcy misses the point. Consumers might be more likely to buy a car from a company restructured by a bankruptcy court, as they buy tickets from once-bankrupt airlines, than to buy a vehicle from zombie companies dependent on the next government bailout. This delay likely hurts “satellite” companies like auto parts makers more than a bankruptcy would...