I try very, very hard not to do anything that would motivate someone -- usually someone more "conservative" -- to call me a conspiracy theorist. Spouting facts and righteous rage like Michael Moore is a one way ticket to joblessness in my (former?) profession. But in some cases I can't help but make some wry observations.  And I have to vent on this subject, although it is no longer as timely.  And I want to know what you guys think.

First, let me lay down some background. I'm no bankruptcy lawyer -- you can't pay me enough to be that kind of vulture...or at least no one has, yet -- but I did work around some (all very nice people, by the way, who seemed to land in that practice as a matter of happy accident rather than ambition...this is what working for the devil for any length of time will do to you) and I understand the basics of a Chapter 11. An "insolvent" company (as defined by the company, in the first instance -- yes, that does have some implications) files, gets together with all its creditors, and comes up with a plan to pay everyone off (less that what is owed) that the Court will approve. Debts discharged forever. During the bankruptcy, the debtor's got to find someone willing to finance it through the bankruptcy, which could take years. Let me define "creditor." That lovely legalese refers to anyone and anything the debtor owes or will owe money. That includes -- you guessed it-- not only the obvious financial lender, but also people who are owed pension plans, people who have tort claims against the company, employees....you know, normal folks. It's during the Chapter 11 process that the Court sorts out and identifies all the creditors and decides who gets paid first. It also has the power to cancel debts in certain circumstances, and also to cancel transfers of money by the debtor to certain closely related people.

Now let me get more specific. In all likelihood, if the big Detroit three file, it will likely be with a "pre-pack." This means that they and their creditors will already have a plan in place, pre-judicial involvement. Not much work for lawyers there. Awe. But also not much chance for the joe regulars to have their say. If they're not at the bargaining table now, they'll never be.

If you're following, you'll begin to understand why I get CRAZY when I hear politicians (republicans?) erupting on tv like avenging angels, screaming at us about "punishing" companies for their dumb mistakes. Dumb mistakes were made, no one can doubt. Hindsight and monday morning quarterbacks etc. "Punishment," in the form of no bailout -- er, bankruptcy -- isn't punishing the companies. It's punishing its creditors. Bankruptcy, after all, was established to protect the debtor *from* its creditors. True capitalism? Letting people fail? Chapter 11, let me tell you, was not in the mind of The Great Adam Smith. It's very un-capitalistic. Chapter 7s are in the same vein; liquidation likewise leaves the debtor free of its obligations...albeit the debtor won't do business again. I shall write sometime about the origins of American bankruptcy law. Suffice to say, at this juncture, that it didn't pass our early Congress until some very important people faced the threat of gaol.

Digression aside, we're going to be paying for the big Detroit three no matter what we do. We will pay it as taxpayers through a bailout, or will shall pay through the cancellation of pension funds, medical care, and salary of big three employees. And we won't even get a say how the money is spent, in bankruptcy. Even less than we do with their new "plan" currently considered by our esteemed legislative colleagues. And I bet (and I don't have a lot of disposable income at the moment) that the stacks of paper currently before Congress will be the identical twin of those submitted before a bankruptcy Court. Yes, their financiers will take a hit...but didn't they just find a $800bn early christmas present under their trees?