A Comparative Study of Bankruptcy as Bailout

Abstract:     
In this article, using a comparative approach (Canadian versus American and automotive versus financial sectors), we build on the defense of the Chapter 11 automotive cases that one of us has already put forward elsewhere. That is, the Chrysler and GM cases did not subvert normal Chapter 11 practice. Rather, we argue that the automotive cases are a good case study of how governments can provide money to a failing but significant industry in a consistent and transparent manner. This article is not about whether governments should fund failing industries. Rather, we argue that once such a decision has been made, the bankruptcy system is an effective way to implement such a decision. Further, using the bankruptcy system to effect government funding of a failing industry does not distort the bankruptcy system.

Number of Pages in PDF File: 21

Keywords: Chapter 11, CCAA, Lehman, AIG, GM, ABCP

Accepted Paper Series