The President is trying to find some way to convince GM’s (GM) bondholers that The White House really will let the Detroit icon fall into bankruptcy.
But it’s easier said than done. You can’t prove that you’re going to do something like that until you’ve done it. And so far, the government hasn’t shown that it’s good at letting businesses fail.
One way to keep up the pressure is to continually make leaks in the media — there’s a fresh set out today — about how Obama believes bankruptcy is the best option for restructuring these companies. Of course it’s just spin, but if he can give off the sense that these leaks represent his “private thoughts”, then they carry some weight.
The other smart move was timing. Chrysler just has 30 days. GM has 60. What that means is that in a month, Obama can let Chrysler — the less significant firm — go bankrupt. Then with 30 more days to restructure, the GM stakeholders will see that it could actually happen. It’s a smart piece of applied game theory.