Representative Barney Frank (D-MA), chairman of the House Finance Committee, has come out and said what many are saying: one of the biggest reasons why the U.S. automakers (“The Big 2.5”) might want to go into bankruptcy: to get out of ruinous union contracts. This upsets Representative Frank, long a champion of unions.

Normally, I would not be overly concerned about Frank’s observations. He has a stellar history of being spectacularly wrong on financial matters. He was a staunch opponent of imposing any sort of increased regulations on Fannie Mae and Freddie Mac, even to the point of pronouncing them entirely sound as recently as January of this year. The Wall Street Journal thoroughly documented his history as Fannie and Freddie’s “patron saint” on Capitol Hill.

So on matters financial, Frank is probably a good touchstone: the louder he proclaims something, the better the odds that he’s wrong.

In this case, though, he’s right: one of the reasons why the automakers would seek bankruptcy would be to get out of their onerous union contracts. And while breaking those contracts would not necessarily break the unions, it would be a severe blow.

And it is a blow that must be struck. As noted in countless other places, American automakers spend about $72 per hour in labor. Foreign automakers in the US spend about $48 per hour. This is a crippling disadvantage, and one that is simply not sustainable. Reworking the contracts to a more sane, survivable standard is an absolute necessity if the big 2.5 are to survive in anything resembling a recognizable form.

Of course, that is only part of the situation. The management needs to be shaken up at least as thoroughly. When the CEOs of Ford, GM, and Chrysler went to Congress to beg for $25 billion in loans to keep afloat, they each flew in on their luxury corporate jets — which, they say, are “non-negotiable” in any proposed bailout. These companies are not likely to reform their management as radically as needed on their own.

Both these problems can be resolved with one solution: a bankruptcy filing. The court would be empowered to re-negotiate the contracts, and impose changes in management. On the other hand, any kind of loan would only postpone the current situation. It would allow the companies to continue to hemorrhage money at a fatal rate. All $25 billion would buy is a couple of months’ grace. And when it is gone, then everything would be right back to where it is today.

Except the execs and the unions would have a little more money in their own pockets. And that is precisely what Representative Frank seems to be backing.