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The Detroit Three: If we must bail them out, do it after they file
TigerHawk — This afternoon I argued to an old friend that if we are going to devote taxpayer dollars to the Detroit Three, we should do it in the form of "debtor-in-possession" financing after they file under Chapter 11. That is the only chance to deal with the structural issues facing the industry, including the dealer network, the union contracts, and the retiree healthcare obligations. So, naturally, I was delighted to see that Todd Zywicki at the Volokh Conspiracy -- a smarter man than me -- makes the same argument , only with more nuance. Any bailout without Chapter 11 is throwing ...

MORE ON BANKRUPTCY AND THE DETROIT THREE: But the other half of an argument against a bailout is …
Instapundit — MORE ON BANKRUPTCY AND THE DETROIT THREE: But the other half of an argument against a bailout is that GM (or the others, but I’ll use GM to illustrate the point) presents an unusually good case for Chapter 11 reorganization. GM is, in fact, the textbook example of what Chapter 11 was invented to do. GM almost certainly will not liquidate, and if it does, then this will almost certainly be beneficial from a social perspective because it will illustrate that the resources are better deployed elsewhere in the economy. Read the whole ...

Two types of failure
Daimnation! — The Volokh Conspiracy's Todd Zywicki explains why General Motors is the kind of case for which Chapter 11 bankruptcy protection was developed: The fundamental question for any bankrupt business is whether the business is economically failed or financially failed. Economically Failed: If the business is economically failed, then this means that the current deployment of assets to that company is economically inefficient--i.e., the opportunity cost of using the assets in this manner is less than their current deployment. For instance, if a typewriter manufacturer were to file bankruptcy today, it is likely that ...