Auto bankruptcy: Just Say No

This morning, Brookings Institute economist Robert W. Crandall was on Bloomberg Radio flogging the idea of a prepackaged bankruptcy for Detroit’s carmakers. It’s the best solution, he argued, because the car companies could negotiate cuts with their lenders, unions, suppliers and dealers before going to court and then the judge will quickly pound his gavel and all will be well. About 450,000 retirees and workers will accept smaller healthcare benefits and pensions, GM can kill brands without buying off dealers and rewrite the union contract. The government will provide the debtor-in-possession financing to keep, say, General Motors afloat while the courts work it all out. It’s done. It’s a snap.

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