The Unnecessary Bailouts

University of Pennsylvania law professor David Skeel has a great commentary in the Wall Street Journal on the political folly of the GM and Chrysler bailouts. The entire article is worth reading, but what I appreciated most was his recognition that the bailouts didn’t have to happen at all. He writes:

Nor would both companies simply have collapsed if the government hadn’t orchestrated the two transactions. General Motors was a perfectly viable company that could have been restructured under the ordinary reorganization process. The only serious question was GM’s ability to obtain financing for its bankruptcy, given the credit market conditions in 2008. But even if financing were not available — and there’s a very good chance it would have been — the government could have provided funds without also usurping the bankruptcy process.

Although Chrysler wasn’t nearly so healthy, its best divisions — Jeep in particular — would have survived in a normal bankruptcy, either through restructuring or through a sale to a more viable company. This is very similar to what the government bailout did, given that Chrysler is essentially being turned over to Fiat.”

Bankruptcy laws exist for a reason, and they are used by big and small companies all the time. This process could have worked with GM and Chrysler as well. Taxpayers and American business suffer in the long run when exceptions are carved out for politically motivated purposes. This is no exception.

Most Popular

Elections

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More
U.S.

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More