Bring On "Chapter 10"

Recently, Barney Frank pointed out the obvious: If Chapter 11 bankruptcy isn't suitable for companies like GM or Chrysler, Congress can pass a new form of bankruptcy ("Chapter 10") that will allow them to continue payments to suppliers.

Meanwhile, the outlook for GM and Chrysler in their present forms continues to darken.

This leads "straight talkers" like John McCain to embarrass themselves,

McCain said the Obama administration didn't make the tough choice by letting GM fail, and instead has trapped itself in spending billions on a company barely on life support.

The problem, of course, is that the decision not to let GM and Chrysler fail was made by the Bush Administration.

Speaking from the White House at 9 a.m., Mr. Bush said the administration decided against forcing a bankruptcy to compel cost-cutting, fearing consumers might desert one or more of the car companies and touch off a broader collapse. Executives of the car makers have made similar arguments.

"Under ordinary economic circumstances, I would say this is the price that failed companies must pay, and I would not favor intervening to prevent the auto makers from going out of business," the president said. "But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."

In essence, Mr. Bush's plan lets the auto companies survive through March. He leaves it to the Obama administration to decide many tough questions after that.

But despite his dishonesty, McCain has a point. If we're going to pretend that we actually follow capitalism, or have a market economy, we need to consider how we can let companies like GM and Chrysler fail, or how we can give them the opportunity to reinvent themselves through bankruptcy despite the poor fit of Chapter 11. So I say, bring on Chapter 10.

Keep GM afloat while Chrysler enters "Chapter 10". If necessary, tweak the legislation to resolve any early problems. After a month or two, if the sky hasn't fallen, ease GM in to Chapter 10 proceedings. They'll emerge as smaller, leaner companies, ideally able to compete on their own merits. Or not. But they'll have a fair chance, and it will minimize the amount of taxpayer dollars we burn trying to sustain them in their current forms.