So why were these problems allowed to fester, when smart people recognized them
all along? The answer is that the solutions were painful, requiring not just
brains but considerable amounts of courage.
A bankruptcy filing may even be a way for the major actors to avoid the political fallout for What Must Be Done. Both the companies and the union can hide behind the Bankruptcy Court and say 'they ordered me to' when their constituents come hollerin'.
I just thought it was awesome that this article combines my bankruptcy class with the journal article I am editing on retiree health benefits.
[XY Comment]: I think that letting GM go bankrupt would be unambiguously correct if there weren't so many other problems in the economy. It's definitely a blackhole for taxpayer money right now and represents transfers from the taxpaying base to the employees and shareholders of GM. While I sympathize with the employees of GM, I think there are people in worse conditions. Using taxpayer money directly for the unemployed would seem to be fairer and a better use of resources.
A lot of losses in the economy are real but they have already hit (see stock market down to a 6 year low). There are multiple equilibria for the market and if everyone thinks it's going down, it's gonna go down. If people think it'll steady out and start spending again, then it will steady out. The worry is that letting GM fail means that people will believe the former rather than the latter.
