Results tagged “bailout” from onegoodmove

Bridge Loan or Bridge to Nowhere

It's difficult to say whether the bridge loan Congress will likely give to the auto industry is a good idea or just another bridge to nowhere. My view is that a loan is probably the best option, that it will be less costly in the long run. I may be wrong about that, but one thing is clear to me. The criticism of the bailout that takes the form of "if there's one thing worse than Detroit managed by the managers who have been driving the American auto industry into the ground it's Detroit managed by politicians."

The argument is a red herring. Congress isn't proposing to manage the auto industry, but to put guidelines in place that will provide direction, guidelines it should have instituted years ago. It is to enforce the kind of rules that would, had they been in place helped the car industry do the right thing all these years. Enforcing tough CAFE standards for example wouldn't have told Detroit how to build cars, but it would have required them to build fuel efficient cars. And if Congress now sets realistic but tough environmental rules, the Detroit managers will use their expertise to design hybrids, electric cars, whatever it takes to meet those standards. That is not managing that is looking out for the long term interest of the country.

There are always requirements when money is loaned, whether the loan comes from private interests or government. An example could be limits on how the money is spent. Monitoring that spending is not managing the car industry it is making sure that the interests of overpaid executives, who often look only at short-term profits and their next bonus, are not confused or conflated with the country's interest. When corporate behavior harms the nation government is failing in its responsibility if it fails to act. The decision needs to be made on what is in the country's interest and nothing else.

Related:

A government-run auto industry
Study: Auto bailout less costly option