Reuters/New York Times
June 23, 2011
Investors fixated on the possibility that a Greek default would deliver a shock akin to the Lehman Brothers collapse in 2008 might want to consider another analogy. A restructuring of Greece’s obligations could more closely resemble the orderly wind-down of General Motors. The carmaker’s bankruptcy filing didn’t cause the market or economic Armageddon that followed Lehman’s demise.
So if that’s the case, what would it take to bring about a G.M. moment for Greece? Preparation, an orderly mechanism and financial support.
The main difference between the two huge bankruptcies of Lehman and G.M. was the level of preparedness of all parties involved. Though G.M. filed for creditor protection in June 2009, its excessive debt and the rich promises it extended to retired employees had made its solvency questionable since at least 2005, when the Detroit carmaker’s credit rating was lowered to junk. That episode gave investors time to reduce their exposure.
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