Friday, October 31, 2008
Editorial: Now a bailout for auto companies?
If lawmakers decide to help Detroit, they should come up with new money and place some restrictions on it this time.
From the RoundTable blog
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Now that the federal government is well on its way to bailing out the nation's big banks, the auto industry wants its own cash infusion. The head of General Motors recently visited Washington, hat-in-hand, and asked for $10 billion to fund a merger with Chrysler.
We're skeptical about whether that's a good investment for America, but if Washington decides to pump that sort of money into Detroit, it should come up with fresh funds, not pull it from funds intended for the financial bailout.
Unfortunately, there is little to prevent Treasury Secretary Henry Paulson from dipping into the $700 billion bailout if he decides GM needs help. When Congress approved the bailout, it included sweeteners to buy votes but skipped restrictions on how Paulson spends the money.
As a result, there are already reports of banks planning to use their bailout money to fund executive salaries and bonuses, pay dividends to share holders, buy other banks or just sit on the cash.
Virginia Sen. Jim Webb this week sent a letter to Paulson demanding he make sure the money goes to better uses. The time for such demands, however, was before Congress rushed to pass a bill.
Nevertheless, like Webb, we hope Paulson will do the right thing and use the money as originally intended.
If he does, Congress would need to find another source for funding any auto bailout. Bring on more debt.
America should think hard before giving any cash to GM, Chrysler and the rest of Detroit. Washington has already committed $25 billion in low-interest loans to help automakers improve their plants. More money would be gravy for an industry -- and its unions -- that brought misery on itself.
For years, these companies pushed gas-guzzling products as every trend pointed to a coming need for more efficient vehicles. Why should taxpayers think GM would do any better next time?
Besides, the head of GM argues his company is too big to fail. Its collapse would inflict pain across many sectors. So he wants taxpayers to help GM become even bigger and more of a behemoth?
Maybe there is a stronger case to be made. Maybe Congress will conclude that this bailout too is necessary to prevent economic collapse. If so, some strings on how the money is spent would be a good idea this time.
