In a blistering article, NYU Law School scholar Michael Levine show what could have happened if General Motors had gone through something much more closely resembling ordinary bankruptcy proceedings, starting late last year. Here’s part of his counterfactual:
What would have been the government’s role in this scenario? Providing bridge financing and a DIP [debtor in possession] loan, and setting a much shorter deadline for filing than was ultimately adopted. The deadline would have forced all parties to negotiate as much “prepackaging” as possible, because unions and unsecured creditors would not have wanted to take their chances on a filing, and the secured creditors could not have been assured of a rapid liquidation in such an important bankruptcy. The loan could have been secured by GM’s assets and a claim on its revenues, and not involved the government in owning and managing the company. The billions of dollars the government would have saved by starting this process last winter could have been used to alleviate collateral damage through aid to state governments, unemployment insurance, etc. Both of those activities would have met genuine needs, commercial and social, without government being forced to own and manage GM.
All this sounds utterly convincing to me.
