sexypants:

randyhaddock:

The US Treasury Department has told General Motors to make all necessary preparations for a possible bankruptcy filing by June 1, even though the troubled automaker insists it can restructure its business on its own, The New York Times reported.

Silly companies, you no longer have a say in how your business is run.

We are so [unhappy, as if the victim of prison rape].

I disagree. Things are bad, and it is bad that we got to this point, but I think this is one of the better possible outcomes. Certainly I don’t think that the bailout should have occurred in the first place. It was, however, deemed unacceptable for GM to fail at the time. GM went to the government for money. The moral hazard became readily apparent (GM bondholders started acting as if a second bailout was guaranteed). There were three scenarios that could have come about at this point:

1. GM restructures on their own, successfully — The perception is solidified that it is ok to go to the government asking for a bailout.
2. The government forces bankruptcy — The perception shifts: Once you go to the government for a bailout, all bets are off. Even if you can make it, the government will shove their solution down your throat.
3. GM fails to restructure, and the government pours money into a black hole — The perception: as long as you employ a lot of people, you are “too big to fail.”

See, I believe that companies should be afraid of seeking a bailout (except for banks). This development might make companies less willing to run their businesses into the ground thinking they can simply go to Washington and cry before congress (except for banks, and insurance companies). Business success or failure should be determined by customers, not by government (except for banks, insurance companies, and hedge funds?).

Yes, I reblogged this just so that I could put that last link there.

On a more-related note, I think that the term “surgical bankruptcy,” when applied to GM, should evoke images of unicorns, fairy princesses, and Falkor the luckdragon. That, or it should evoke images of rabid chimpanzees performing surgery. The former are things that we’d like to believe in, because they are awesome. The latter is messy with great certainty.