All Talk, No Action....

Fiddling while Rome burns.... [Insert cliché of your choice here.]

The point of calling on Congress to come up with the type of "Chapter 10" bankruptcy that its members know to be needed, or for Summers and Geithner to come up with a plan to wind down "too big or too entangled to fail" financial institutions, is not simply to goad them into taking action for the benefit of future generations. It's because things aren't exactly coming up roses right now, and those solutions could be useful, right now.

A group representing General Motors Corp. (GM) bondholders doubts whether the auto maker's survival plan will be enough to keep the company out of bankruptcy given the sharp decline in U.S. vehicle sales.

In a letter sent Sunday to U.S. Treasury Secretary Timothy Geithner and advisors to President Barack Obama's auto task force, advisors to the group say demands that bondholders swap two-thirds of their debt for equity in a restructured GM pose too much risk given the company's precarious state.

I'm not sure whether their concern is truly about GM's ability to survive; I suspect it's mostly about getting better security for their stake. But one way or another, if a "Chapter 10" existed, we wouldn't be having this discussion - either the parties would agree, or the company would enter into the new bankruptcy proceeding. There could be brinksmanship, but it would be qualitatively different - it would be between whether the negotiated outcome was likely to be better for everybody than a bankruptcy proceeding, not about which interest group gets the greatest benefit of an ad hoc taxpayer bailout.