Chrysler: Bankruptcy wins
Chapter 11 bankruptcy is one of the greatest glories of American capitalism. It evolved organically during the financial crises of the late 1880s, was replaced with a more punitive code in the 1930s, and then was resurrected and codified in the late 1970s. Chapter 11 allows companies that got in over their heads to seek a way out that allows them to stay alive. It balances forgiveness with punishment. It allows for fresh starts. When it works as intended, it enables the opposite of the sort of zombie capitalism that prevailed in Japan in the 1990s.
That's not to say it always does work as intended, or is perfectly designed. The practice of jurisdiction-shopping is kinda creepy. And we too often depend on Chapter 11 to deal with messes (our corporate pension system, for example) that could have been more cleanly and fairly resolved by legislation (at least in some parallel universe where the legislating is clean and fair).
But at times like these, when lots and lots of American businesses owe more than they can pay, we should be grateful that we've got Chapter 11 and companies aren't afraid to use it. It's no coincidence that the two biggest problem areas in the current crisis have been the two industries where Chapter 11 hasn't been seen as an option: financials and automakers.
In the first case, the problem is that Chapter 11 isn't up to dealing with a financial panic. It can easily handle the failure of an isolated financial firm in otherwise calm(ish) times—such as Drexel Burnham Lambert in 1990. But when everybody's trying to get their money out of the financial sector at once, as happened last fall, waiting around for a bankruptcy judge to resolve matters isn't really an option.
With GM and Chrysler, the arguments against bankruptcy late last year were:
1) due to the financial panic, the debtor-in-possession financing essential to allowing companies to keep operating while in Chapter 11 simply wasn't available on the scale required by GM in particular
2) fears about warranties and other matters would keep consumers from buying cars made by bankrupt companies.
The government has taken care of #1 by providing the financing, and at least partially addressed #2 by offering to guarantee GM and Chrysler warranties (plus, the companies' woes have already been dragged through the media so much that it's hard to imagine a bankruptcy filing would have a significant impact on consumer perceptions at this point).
So now the news comes out that Chrysler may really and truly be headed for bankruptcy court. It could be messy. It could end up really badly for the company. But it is the American way.
-
1
LITTLE BAILOUT GTO
(Ronnie and the Daytonas, Little GTO)
WilliamBanzai7Sing along link: http://www.youtube.com/watch?v=44kg0IENTPU
Little GTO, you're really lookin mighty fine.
Three billion deuces, a four speed haircut–its Section 363 Bankruptcy time
Listen to her tachin' up now, listen to her why-ee-eye-ine
C'mon and turn it on, wind it up, blow them bondholders out GTOYou oughta see her on a cash burn course for a quarter mile
This little bailout Pon-Pon has got plenty of high finance style
She beats the union gassers and them greedy hedge hoggers, really drives ‘em why-ee-eye-ild
C'mon and turn it on, wind it up, blow them bondholders out GTOPresident Obama sings:
Gonna save some TARP money (turnin' it on, blowin' it out) and buy a GTO (turnin' it on, blowin' it out)
Get a bailout helmet, an Italian roll bar (turnin' it on, blowin' it out) and I'll be ready to go (turnin' it on, blowin' it out)
Take it out to Pomona (turnin' it on, blowin' it out) and let ‘em know (turnin' it on, blowin' it out), yeah, yeah
That expedited Chapter 11's the coolest thing around
Greedy little bondholders, gonna shut you down
When we turn it on, wind it up, blow them bonds out GTO -
2
How appropriate! Bankruptcy, in the very special American way, has been one of the greatest accomplishments of the unique American capitalism. Who would not love it?
By declaring bankruptcy under Chapter 11, Chrysler eschews harassment from its creditors. While that might be construed as the less-than-graceful downfall of one of the Big 3 by many, American auto-consumers should not be unduly dismayed.
Meantime, Chrysler can (and most likely will) restructure and reinvent itself.
(Tan Boon Tee, btt1943) -
3
HAPPY MAY DAY CURIOUS KOMRADS!
THE BAILOUT INTERNATIONALE
(The Socialist Internationale)
Komrad WilliamBanzai7Sing along:
Euro Babble Version: http://tr.youtube.com/watch?v=GvXBNnpHFDI
English Version: http://www.youtube.com/watch?v=5DTbashsKic
Arise ye prisoners of Wall Street blunders
Arise ye victims of greed and Wall Street want
For simple reason in revolt now thunders
And at last comes the age of the bailed out banker hunt.
Away with all those quantitative superstitions
Investor masses arise, arise
We'll change henceforth the old Wall Street scamster tradition
And spurn the securitised dust to win the prize.Chorus
So market comrades, come rally
And the Wall Street bailout fight let us now face
The Bailout Internationale unites the investor human race.
So market comrades, come rally
Don't let that TARP dough disappear without a trace
The Bailout Internationale unites the investor human race.No more deluded by fomulaic hocus pocus distraction
On tyrant CEOs only we'll make market war
The 401k holders too will take evasive action
They'll break ranks and pay their feckless brokers no more
And if those Banker cannibals keep trying
To sacrifice our dwindling wealth to their stubborn Wall Street pride
They soon shall hear the anti-bailout bullets flying
We'll kick those lowdown scheming nitwits in their lowdown scheming backsides.Repeat Chorus
No free market saviour from on high delivers
No faith have we in principles of self regulating fear
On their thieving banker hands the chains must shiver
Chains of selfish greed and foolish fear
E'er those low down banker thieves will disappear with their bailout booty
And keep it all for their scrappy lot.
Each at the anti-bailout forge must do their duty
And we'll strike while the regulatory iron is hot.
- foxjust About to walk to LA Public Library for this http://bit.ly/7LgRu6 Am told only a nobody walks in LA - 1 day ago
- foxjust just took first ride on LA metro. Totally disorienting not to have car to park here - 2 days ago
- foxjust Thanks to Bama fans for reminding us we needed to buy TP! (Turns out we're fine on detergent). Oh, and nice game #ironbowl - 1 week ago
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