The piece brought to mind a comment by some administration apologist in the past few days claiming that the president 'is trying to save the auto industry in America.'
Well, not really. The administration is trying to bail out the UAW, by way of keeping Chrysler and GM out of a bankruptcy court. As it happens, the auto industry in America is quite healthy, thank you very much. Daimler, Toyota, and other vehicle producers located primarily in less-unionized southern states have not asked for aid, are not failing, and seem to be doing just fine.
In fact, earlier this week, a frequent, hopelessly liberal CNBC guest who is apparently an economist, decried the lack of 'legacy costs' burdening newer US entrants, such as Toyota, Daimler, et.al. He stated that it was "unfair" for those firms to be allowed to compete with GM and Chrysler, whose own bad compensation decisions contributed to their current bankruptcies.
Professor Zywicki's main point, however, is that the White House's coercion of the senior secured Chrysler debt holders will likely bring about future unintended consequences. He wrote,
"But we need to ask how eager lenders will be to offer new credit to General Motors knowing that the value of their investment could be diminished or destroyed by government to enrich a politically favored union. We also need to ask how eager hedge funds will be to participate in the Public-Private Investment Program to purchase bank's troubled assets.
And what if the next time it is a politically unpopular business- such as a pharmaceutical company- that's on the brink. Might government force it to surrender a patent to get the White House's agreement to get financing for the bankruptcy plan?"
Which gets to the point I made in this prior post. Both business and government overstepped their boundaries and failed to simply follow conventional procedures for the bankruptcy of American corporations.