Tuesday, November 18, 2008
Bailout
We met at the Wall St atrium for the discussion on the bailout. At the discussion I learnt one interesting thing. It seems its better for the auto companies to go into chapter 11 bankruptcy, and then get some money for retooling. This will allow them to restructure the management as well as renegotiate with the Unions. Overall my thinking is, even if they get the money, I don't see what the next game plan is. On the other hand if the finance industry gets a bailout, why not the auto industry? (nothing extra below fold)
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2 comments:
reading up more on the problem I see the following issues:
1. If they go into bankruptcy, no one is going to buy cars from them irrespective of govt assurances.
2. Will have enormous ripple effect.
3. The biggest argument is not to have the shock of the collapse of the big 3 to the economy at this vulnerable juncture. It seems that some including Krugman and Simon Johnson argue providing $25 billion to basically push the problem by six to twelve months so that it doesn't affect the current crisis.
But in the end, there still is no game plan.
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