A note from my colleague Doreen Hemlock....hjb

As the federal government moves to take a bigger stake in Citigroup and other banks, there's growing talk of a larger government role in the U.S. auto industry too.

Mike Jackson, chief executive at AutoNation, the country's largest auto retailer, says one option gaining popularity is a " government-sponsored bankruptcy" for financially troubled GM.

A traditional Chapter 11 bankruptcy would be "catastrophic," Jackson says, because there's not enough credit available from banks to allow GM to reorganize and emerge leaner. The carmaker and many suppliers would go bust, costing millions of U.S. jobs. U.S. taxpayers would never recoup their loans to GM, he says.

A better option, Jackson believes, is for government to lend more to GM -- with conditions, including big concessions from its unions and bondholders. Loans would be the fastest and cheapest way for taxpayers to get repaid, he says.

But with the public wary of further loans, a managed bankruptcy might be next best. The government would finance GM's restructuring and oversee negotiations. Unions and bondholders likely would end up conceding more, and the process would take longer and cost more, but taxpayers would get their money back, Jackson says.

The growing prospect of a government-sponsored bankruptcy might even avert one, serving as leverage in GM's ongoing negotiations and prodding concessions faster, says Jackson. He expects "very intense" talks and "gnashing of teeth" in the coming weeks, as auto sales languish.