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Bankruptcy

: Credit Slips

Nader on Chapter 11

By Stephen Lubben

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Ralph Nader, the consumer activist and (perhaps) decider of presidential elections, is out today with an editorial in the WSJ that argues for more Congressional involvement in the automotive bankruptcy cases.

Think about that for a moment. More people involved in the negotiations. Great idea.

But it is clear that Nader's view of how this should work is very different from mine. Indeed, he seems to suggest that GM and Chrysler should remain uncompetitive, so as to preserve jobs at unneeded dealerships and plants. He also suggests that the auto task force should do nothing that increases the profitability of the automakers at the expense of the consumer. All of which seems to me to be a recipe for a complete liquidation of the companies at some point in the near future. As Corrine Ball said at tonight's (still ongoing) Chrysler hearing, that surely can't be a better result.

The piece is also interesting for its obvious lack of understanding of chapter 11. For example, he asks if "any rights of owner-shareholders to decide whether they want their company to be dissolved?" First of all, there is no formal dissolution here -- old Chrysler will persist; secondly, what about United States Constitution, article VI, paragraph 2 and Article 1, Section 8, Clause 4?

He goes on to ask several additional questions about the effects of the bankruptcy cases, the answer to which are rather obvious, if you know bankruptcy. Perhaps the bigger question is why the WSJ keeps running editorials about these bankruptcy cases, written by people who don't understand chapter 11.

So maybe I have become grumpy.

Full post as published by Credit Slips on May 29, 2009 (boomark / email).