Bet Ron Gettlefinger is kicking himself

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Bush weighs "orderly bankruptcy" for the Big Three.

This is the option that's always seemed to make the most sense to me.  The "Car Czar" didn't really seem to be much different from a bankruptcy judge, except perhaps in allowing all three to collude to beat up on either consumers or suppliers.  We have a very, very good system for taking distressed companies back to profitability--to be sure, it doesn't always work, but it works better than anything else anyone's ever tried.

The biggest concerns about bankruptcy are two:

  1. How will the Big Three obtain Debtor-in-Possession financing in a credit crunch?
  2. How will they convince people to buy their cars if there's a risk that the warranties will be no good, or Detroit will fail and hence stop making parts?

The government is in a pretty good position to answer that question; it can be the lender of last resort, and if necessary, it can guarantee the warranties, and loan Detroit the money to build a "parts bank" to insure customers against liquidation risk.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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