Bankruptcy

Avoid Chapter 11 at All Cost!!!

By Stephen Lubben

One thing that I think we all agreed on in yesterday's panel on "too big to fail" was that many of the plans for a separate resolution authority are being driven toward a FDIC model by Treasury and the Fed, both are whom are more familiar with that approach, rarely talk to restructuring or chapter 11 people, and continue to have an unbridled fear of chapter 11.

More of that can be seen in yesterday's TARP COP report on GMAC, which really seems like the little sister to AIG. I believe both GMAC and AIG would have been better handled in a government-supported chapter 11 process, that would have provided a legal framework for driving a hard bargain with the firms' counterparties and showing shareholders and bondholders that failure has real consequences.

Full post as published by Credit Slips on March 11, 2010 (boomark / email).