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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (44625)	8/2/2010 8:59:00 PM
From: TimF	2 Recommendations Read Replies (2) \| Respond to of 71588

Re: "The government having an influence when it is providing the bailout...." It is called "Debtor in Possession" status. Call it anything you want, it doesn't make how it was exercised in this case a good idea. It is an aspect of American bankruptcy law that has existed for DECADES. That the "debtor in possession" will have a lot of influence over the whole situation - Yes. That the government should be that debtor and should exercise that influence - No That the influence should be used to reward politically favored special interests - No That the senior creditors should be made subordinate to the junior creditors - No I'm not disputing the doctrine, I'm disputing the idea that the government becoming the "debtor in possession" was a good idea, and I'm arguing against the decisions it made once it took over that role. The purpose of American bankruptcy law is PRIMARILY to craft a strong commercially viable enterprise out of the ashes of it's previous commercial failure Which could have happened without any of the items mentioned above with "No" after them. Just have GM declare bankruptcy. Also the specific interventions by the government once it took control, make GM less viable then it otherwise would have. Shafting the senior creditors, at the margin makes future loans harder to get, perhaps not to a huge extent (depending on too many factors to be sure now), but it would probably have a negative effect on all shaky enterprises with politically favored junior creditors. More directly and importantly, the unions got more out of the deal than they would have gotten without the government intervention, making future costs higher than they otherwise would have been.