As I understand it, the big 3 are saying they _can't_ file for chapter 11 bankruptcy due to the current lending climate. They argue that since the financing climate is so harsh, no one will finance them while they restructure, thus forcing them into a chapter 7 bankruptcy-effectively causing a fire sale of the company and its assets.
Sounds like Romney is advocating a "managed bankruptcy" where the government would facilitate a chpt11 bailout of the Big 3. Republicans want to avoid supporting an all out bailout whereas Democrats want help "main street" by helping the Big 3 avoid big-bad-bankruptcy. Obviously there is a lot of word wrangling going on in politics but it seems like this would be a good solution if it is communicated well.
Technically, this is called debtor in possession financing. The DIP financing agent has a higher priority than existing debtors and bondholders when it comes to getting a payout after restructuring.
Sounds like Romney is advocating a "managed bankruptcy" where the government would facilitate a chpt11 bailout of the Big 3. Republicans want to avoid supporting an all out bailout whereas Democrats want help "main street" by helping the Big 3 avoid big-bad-bankruptcy. Obviously there is a lot of word wrangling going on in politics but it seems like this would be a good solution if it is communicated well.