Why Detroit Is Not Too Big to Fail

Why Detroit Is Not Too Big to Fail by Michael Schuman:

Take, for example, the 1999 collapse of South Korea's gargantuan Daewoo Group in the wake of the Asian financial crisis .... The Korean economy didn't fall into the Pacific after Daewoo's tumble as many had feared. Korea's GDP grew 9.5% the year Daewoo failed, and 8.5% the next.

Japan learned a similar lesson during the economy's Lost Decade after a stocks-and-real-estate bubble burst in the early 1990s. In a pathetic attempt to avoid losses, Japanese banks kept pumping fresh funds into debt-ridden, unprofitable firms to keep them afloat .... It was only after Japan began solving its zombie problem, rather than perpetuating it, that the country's financial crisis was finally resolved.