President-Elect Barack Obama’s transition team is exploring a swift, prepackaged bankruptcy for automakers as a possible solution to the industry’s financial crisis, according to a person familiar with the matter.
Obama’s team has already contacted at least one bankruptcy- law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.
This really makes the most sense. In the first place, there’s simply no reason to believe that $25 billion would in one fell swoop transform Detroit into the forward looking companies they need to be. I’m inclined to believe Mitt Romney — even if he’s quick to finger the UAW — that this was first a crises of management and poor vision. Sure, the credit crisis had made acute Detroit’s problems, but there’s no guarantee they wouldn’t have emerged at some point later. If the government agrees to guarantee solvency during Chapter 11, it should be a cost effective solution that addresses some of the root problems directly.
Besides, I hear this Dan Tarullo guy is known to have progeny with good taste in internet reading.