Monday, November 24, 2008

Auto Bailouts

Edward Glaeser writes (NYT):
The hard-line argument against aid to Detroit, or any other declining industry, starts with the idea that the American economy works best when capital and labor head to our most productive sectors. The buying habits of consumers tell us which companies are delivering cutting-edge products. America has plenty of great companies that make software and movies and biotechnology and breakfast cereal.

[...] The car companies can’t be fixed with a scalpel — they need major surgery. Only the power of a bankruptcy court will enable G.M. to rewrite its obligations to its many creditors and to restructure itself sufficiently so that it can again become profitable.

The enemies of bankruptcy argue that no one will buy a car form a bankrupt company. This makes little sense to me.
He's open to government assistance following Chapter 11.

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