While watching the Sunday morning news talk shows, I was struck by a certain disconnect. On one hand, you have people (such as Senator Shelby) who don't want for the government to give a blank check to the auto companies, that their needs to be extremely strong oversight, but they were unwilling to give specific examples of what kind of oversight might be sufficient. For them, bankruptcy for the auto companies is a better option. On the other side you have people like Senator Levin who believe that a bailout is absolutely essential, but who really don't understand the need for strict oversight.  Even so, both of them were far more helpful than Gettelfinger, the chief of the UAW.  Yesterday he commented that workers had made enough concession and no more would be agreed to. Apparently, Gettelfinger has about the same level of attachment to reality that is typically seen in psychiatric wards.

The roundtable discussion later on in Meet the Press was more helpful, but only to a point. Tom Friedman was on it, again doing his best Bob Seger impression (coming up with an insightful catch phrase and then relentlessly beating it into the ground). Katty Kay of BBC was a bit more in the middle, talking about the need of a bailout which was simultaneously very punitive for those in the auto industry (both workers and management).

As usual, both sides are right and both sides are wrong. The oversight for the financial bailout has so far been mainly illusory; nevertheless, a bailout was, and remains, necessary. The question is what is the best structure for the bailout that meets all the necessary goals. Bankruptcy might be a good option, but Chapter 11 bankruptcy will not allow the influx of cash necessary to keep the auto makers open. So the bankruptcy courts are not the best option, at least not as bankruptcy jurisdiction currently exists.

Perhaps the best option then is a dramatic expansion in the jurisdiction of the bankruptcy courts. An entire new set of cases could be given to the bankruptcy courts (the jurisdiction to be created in a new Chapter 15 of the Bankruptcy Code). The bankruptcy courts can, and I believe should, administer the bailout. The advantages are huge:

• Coersion: A bankrutptcy court can force companies to do things they couldn't normally do. The union contracts need to be torn up. Ditto for upper management. A special master can be hired to enforce best business practices at different levels of the company.
• Supervision: It is in the core institutional competency of the bankruptcy courts to oversee companies which are doing badly. In constrast, a board of oversight is attempting to create the procedures of oversight from nothing at all, without institutional knowledge of how it should be done. In bankruptcy courts, there are established procedures for ferreting out accounting and other malpractices hidden deep within the company books. This way, the bailout money can go directly to where it is needed.