Originally posted by: dullard
Originally posted by: Thump553
This talk of an orderly Chapter 11 is pure nonsense-every Chapter 11 is orderly and the law is well laid out. I wonder how GWB proposes to change the bankruptcy law so that the auto companies can honor the claims under existing warranties over other general creditors? If those claims aren't honored there is no sense wasting even the miniscule filing fees for a Chapter 11-go straight to Chapter 7 and liquidate them, for GWB will have put the final nail in the coffin.
Yes, bankruptcy is generally orderly. But, they tend to be slow. If the government really wanted to do it, this whole bankruptcy thing could be handled in days. (1) Loan enough money so that they have no creditors other than the US government and the existing warranties. (2) Pre-negotiate the post bankruptcy contracts - mostly with the union. (3) Have the judge order new warranties be handled by a financially sound 3rd party, heck even pay a third party to take the existing warranties. It'll be costly and painful, but a new phoenix will emerge from the rubble.
A couple of problems with your solution. Loaning enough money to cover everything but the warranties would probably run hundreds of billions, maybe even into the trillion range. Think that will pass Congress when the Senate shot down a $25 billion temporary bailout package?
Your third point is also very problematic. The existing warranties are valid contracts between the previous customers and the car companies-any court action to recast those agreements would have to pass constitutional muster (not at all certain) and require new legislation. I don't see the GOP supporting legislation to walk willy nilly over contract rights, nor do I see GWB drafting and Congress adopting a rewrite of the bankruptcy code in a couple of days. The last time it was revised it was a decade long battle.
Somehow I dont see anyone trusting GWB enough to come up with a prepackaged Chapter 11 in a few days, nor do I see GWB taking any time out from his ego--polishing tour to do the heavy lifting to negotiate it. Remember also that still has to negotiate a Middle East peace agreement by the end of his term, among other things.
Someone mentioned that there has to be a repayment plan in a Chapter 11. That's true-but it doesn't have to be 100%, just more than the creditors would receive in a Chapter 7 liquidation. A 100% repayment Chapter 11 is the rare exception, in actuality.
I stick by my original assessment-GWB is weaseling out of taking any action, even if his inaction will make things far worse for the US and the next Administration. Shame on him.