Thinking About Private Sector Bailouts
Tuesday November 18, 2008
As the lameduck Congress thinks about bailing out Detroit, we should consider the results of past bailouts, and specifically look at the Chrysler example. The arguments made in 1979 resonate today:
There is a strong case that such help rewards failure and penalizes success, puts a dull edge on competition...
That federal loan was contingent upon "other contributions or concessions [being] given to Chrysler by its own owners, stockholders, administrators, employees, dealers, suppliers, foreign and domestic financial institutions, and by State and local governments." Can you really imagine this Congress putting those kinds of strings on a loan or loan guarantee for Detroit? I can't.
See the Wall Street bailout vote and Why The AIG Bailout Is Not Like Chrysler