Paul Krugman on the Bailout for the Big Three

Question: What is the proper way to bailout the Big Three?

Paul Krugman: I think it’s a combination. I think it’s essentially bankruptcy, bankruptcy with safeguards, that you have credit lines, we have this mechanical thing, which is that [IB] financing, which you need to just to do business is not available in the current market. So, at chapter 11, if you try it, immediately it turns into liquidation because the credit isn’t there, so you have the credit lines from the Federal Government just to keep the thing running. And then, on top of that, you probably need something like warranties for car buyers, because there’s the real problem will you buy a car from a company that is, you know, that is bankrupt and may not be producing those cars. That’s possible, and I leave this to the legal minds. It may be necessary to have a bankruptcy but not in name, that essentially you have a government seizure but you don’t call it bankruptcy, because the word bankruptcy itself will scare off the buyers. But, you know, they cannot be allowed to simply slide into the, into whatever would be, I guess Lake Michigan. Not into the sea, but into the big lake. Not right now, anyway. But, on the other hand, you know, we’re not in the business of letting management and stockholders off the hook.

Krugman describes bankruptcy with safeguards.

Related Articles

Wider-faced politicians are seen as more corrupt

New research offers a tip for politicians who don’t want to be seen as corrupt: don’t get a big head.

Researchers at Caltech discovered that wide-faced politicians are seen as more corrupt. (Keystone/Getty Images)
popular

Keep reading Show less
Playlists
Keep reading Show less

Five foods that increase your psychological well-being

These five main food groups are important for your brain's health and likely to boost the production of feel-good chemicals.

Mind & Brain

We all know eating “healthy” food is good for our physical health and can decrease our risk of developing diabetes, cancer, obesity and heart disease. What is not as well known is that eating healthy food is also good for our mental health and can decrease our risk of depression and anxiety.

Keep reading Show less