A GM bailout would delay restructuring and ultimately destroy jobs. Restructuring under Chapter 11 is the best solution, but credit market conditions require the US government to provide transitional, “Debtor in Possession” financing. To avoid political interference, the actual lending decisions should be made by a commercial bank with a stake in the outcome

Not long ago, Alitalia was one of the largest airline companies in the world. Today it is a shadow of its former self, having burned massive amounts of taxpayer money before finally entering bankruptcy with few assets remaining. The principal culprit of this debacle was the Italian government. Trying to avoid the political pain a bankruptcy would have caused, the government continued providing subsidised financing to the money-losing airline, delaying the necessary restructuring. Not only was a gigantic waste of taxpayers’ money, but it was a death sentence for the very company it wanted to save. …