Austan D. Goolsbee and Alan B. Krueger have just posted a working paper, “A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler,” that is going to be a Journal of Economic Perspectives article (I saw it via Marginal Revolution). They were involved in the process in the Obama Administration. They think the rescue was a success, but I think there are some things about the process that they don’t notice, much less deal with. I’ll let them know about them, and maybe they’ll address them in the final version.
The biggest problem to sort out is the difference between the accounting/legal and the economic assets. When a company goes bankrupt, the first-order economic effect is zero, despite the drastic accounting/legal effect. The assets are the same as they were— they’re just owned by different people. It’s not necessarily any different than when existing shareholders sell 60% of the stock to new shareholders. In bankruptcy, the existing shareholders are in effect forced to give up 100% of the stock to the people who lent them money they can’t repay. Often those people will decide the company isn’t worth keeping together, so they sell it off in pieces, at the extreme auctioning off the land, trucks, and furniture. But it’s not like a nuclear bomb hit the company’s property.