If the big banks fail, we risk systemic failure throughout the economy, because every activity in our country depends on banking in some way. Just imagine what would happen if ATMs and credit/debit cards all stopped working one day. It would only take a day and there would be chaos. It would be nice to think the banks could have gone through structured bankruptcy, but the panic that would have caused could have had the same effect as if the banks all shut down.
The automakers, on the other hand, are not tied to every facet of the economy. They could go through bankruptcy, wipe out shareholders, union agreements, pensions, etc. and continue to operate as long as the government provided financing through a structured bankruptcy. I don't believe the spin in some circles that Chaprter 11 for the automakers is either impossible or so painful that it could never be contemplated. Let me be more precise and revise my initial statement, though. I would be OK with the government financing the automakers as a last resort if it happened as part of a structured BK that wiped out all the burdens that have been weighing them down for so long. I don't know if that is a realistic proposal. The unions would fight tooth and nail to prevent pensions and union agreements from being wiped out. Even if they were wiped out, the unions would take the first opportunity they could to strike for a better agreement, potentially putting the companies back into a similar position they are in now. Certainly the health care and pension obligations being taken off the books would help tremendously, but there would have to be some argreement that the unions would stick to more modern benefit demands like 401K and health plans than pensions and health care for retirees. Those are simply not sustainable benefits, as the $66 billion that GM has lost in the last four years demonstrates. Won had a pretty good explanation on another thread about the difference between the banks and automakers, basically that the banks were facing a short-term crisis, but the automakers have been facing long-term structural problems with their companies for years, and the crisis just exacerbated the problem. On Wed, Nov 12, 2008 at 8:12 PM, Judah wrote: > > As I recall, you were fine with the government buying stakes in > finance companies so long as they are non-voting shares. What's the > difference here? > > Not that I'm in favor of either plan, but I'm genuinely curious what > you think the big difference is. > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:280191 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5
