No. of Recommendations: 18
Had General Motors and Chrysler gone Bk, they would simply have been reorganized and continued in business at vastly lower cost to the government.

Another fantasy of the right. In order to stay in business during bankruptcy, a business must still have cash to pay suppliers, ongoing expenses, workers, and so on. Usually once a firm declares bankruptcy it can line up new sources of cash, collateralized by equipment, future cash flows, inventory and so on, because old debtor claims on such have been negated.

Unfortunately during the crash of 2007/2008, there was NO FINANCING AVAILABLE from any source at any price. Conservatives can't seem to understand that not everything is the same, always. The recent crash was a worldwide liquidity lockup, where no one was willing to finance ANYTHING for fear of the entire world economy collapsing.

Rather than work through a traditional bankruptcy with debtor in possession financing, GM and Chrysler would have had no option but to proceed directly to liquidation. That, of course, would have rippled far beyond the several hundred thousand direct employees of the firms, and would have taken down suppliers in glass, rubber, steel, and electronics, as well as dealerships around the country who would have had no automobiles to sell.

Someday, eventually, that slack would have been picked up by Toyota or whoever, but in the meantime it would have had the same kinds of effects as the crash if 1929, which took down major swaths of the American economy, and which did not fully recover for 15 years, and then only with the largest Keynesian stimulus in the history of mankind: World War II. And there is no assurance that the suppliers which went under would be replaced by American suppliers; more likely much of that value chain would have been replaced offshore, further contributing to the decline of the American manufacturing sector.
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