It appears as if our clueless government might finally be taking some steps in the right direction. Rick Wagoner is finally out at GM (something I have been calling for for years) and the government appears to be seriously pondering the option of bankruptcy for GM and Chrysler (also something I have been calling for).
The administration’s auto team announced the departure of Mr. Wagoner on Sunday. In a summary of its findings, the task force added that it doesn’t believe Chrysler is viable as a stand-alone company, and suggested that the best chance for success for both GM and Chrysler “may well require utilizing the bankruptcy code in a quick and surgical way.”
The market clearly doesn’t like the news as futures tank 150 points as I write, but this is a step in the right direction. We need to start punishing those that made mistakes rather than bailing them out at every step and further bankrupting the U.S. Treasury. The system is trying very hard to remove the bad seeds, but we seem vigilant in meddling with that process. A GM and Chrysler bankruptcy will have devastating effects on the market, but it is a necessary step in getting back to a normal market. In my opinion, I prefer to see some short-term pain so long as it sets the foundation for a stronger and fiscally responsible America.
PS – That loud sound you’re hearing is the drum beat for bank nationalization. Organized bankruptcy/nationalization is the only way to rid the system of these toxic assets. Transferring them to another balance sheet is not a rescue plan….