Don't Believe the Worst-Case

Andrew Redleaf and Richard Vigilante's argument for letting the automakers (and the union that feeds off them) face bankruptcy should definitely be on your reading list for today:

Over the past couple of decades, the suppliers - actually systems makers - have taken over most manufacturing of American cars. The "hollowed out" Big Three now have not much more to do with making cars than Dell has to do with making PCs (which of course are really made by Intel and Microsoft).

In that sense, the Big Three have already been through bankruptcy once - except that they outsourced their bankruptcies over the last 20 years to their suppliers, along with their design and manufacturing. ...

... Bankruptcies are essentially negotiations among claimholders, supervised by a judge. To get to a "fire sale" liquidation, most of the most powerful claimholders must first want to get there, and then the judge must agree to enforce this outcome against claimholders who oppose it. ...

As long as the government continues to conceive its job as saving bad companies from their just deserts - rather than getting the trillions of dollars of credit destroyed by the panic back out to the productive economy - the bailout will continue to expand and continue to fail.