The bailout's ugly moral hazard

Today, the leaders of Ford, GM, and Chrysler, the "Big 3" US auto makers, are in Washington, DC, to ask Nancy Pelosi for another $25 billion of taxpayer money. Of course, unlike with banks and insurance companies, the Democrats want to give money to the union-dominated car industry. Indeed, it's being reported that the head of the United Auto Workers will be joining the meeting. They're asking for the money as a loan, but if there was ever a sub-prime loan, this would be it. The idea that taxpayers should risk $50 billion to bail out an industry which has done itself in by excessive fealty to unions, by being too late to design attractive and efficient cars, and generally by being the worst of the world's major modern car makers, is outrageous. It is even more outrageous than the bailout...but not that much more. And there's the problem. The bailout has given cover to all those who want to bail out any industry that can claim to need it. Yes, it's not the same to say you're protecting the whole financial system and to say you're helping out one industry. But it's not different enough to be obvious either, to the vast majority of Americans. And as if that's not enough, other American governments now have political cover to ask the federal government, meaning all of us who pay federal income taxes, to bail them out from their profligate ways. After all, if we should bail out private companies, how could we not bail out the government of California or New York? The bailout is going to end up costing the taxpayer some measurable fraction of the entire current national debt, maybe 2 trillion (with a debt of just over 10 trillion). It is the darkest stain on the Bush presidency and will haunt us for years to come, especially after the leftists we just put in charge take it to its logical conclusion.
  • Tom
    Comment from: Tom
    11/06/08 @ 03:35:38 pm

    It's interesting....the original Chrysler bailout produced a profit for the government of over $660 million. I don't see that repeating. Some of the bank warrants could also produce profits in the future as could real estate that appreciates in the next several years. Some of the insurers don't want the bailout money since they would prefer getting funds from the private sector. There was some good info on this subject at: thebailoutblog (dot) com