GM Bankruptcy

Bankruptcy is not a process that should be feared by the American people – or by General Motors.  Sometimes it acts as a grim reaper.  Sometimes it has the power of the Phoenix allowing failed businesses to rise from their ashes.  But always it is the great equalizer which is precisely what Congress intended.

So why are GM and the country so afraid?  The answer appears to be very straight forward – loss of the company and the attendant jobs.  That’s arguably never a good thing.

Consequently, in our bailout driven economy, there is much talk of the Treasury, a/k/a Santa Claus, waiting on the scenes for yet another golden delivery.  The great Greek playwrights had a most descriptive word for this process – deus-ex-machina, which means “chariot from the heavens”.

• read the full post from Charles Moster of MosteryWynne: “GM Bankruptcy - To Fear or Not to Fear“

Bankruptcy and Bailouts

As a bankruptcy attorney and former lawyer for the Feds, I feel compelled to point out the drawbacks of the current bailout to GM and other entities which might seek Chapter 11 protection.  The bankruptcy laws afford no special protection to taxpayers in a bailout situation.  As such, the massive outlay advanced by the American people may never get fully repaid in a Chapter 11 proceeding which is highly problematic.

The purpose of Chapter 11 is to allow the honest debtor to reorganize its debts and thus restructure obligations to creditors.   The process necessarily involves the reduction of creditor claims so that available assets can be more equitably distributed.  In most contexts that makes perfect sense.

However, the Bankruptcy Code recognizes special protection for discrete groups like the American taxpayer when a situation so warrants.

• read the full post from Charles Moster of Moster & Wynne:  “Bankruptcy & Bailouts - Need for Reform“