The auto bailout: a plea for ruthlessness

If there’s to be an auto-company bailout, the stockholders and the bondholders ought to take their share of the hit. And the companies should be forbidden to spend any more money buying political influence.

Let’s assume for the moment that there’s a case for bailing out the automakers, if only to avoid the inefficiency of Chapter 7 bankruptcies, and even though the UAW refuses to make any concessions.

Is there any case for giving the stockholders and bondholders any of the benefit? Shouldn’t the bondholders be paid off at the current (extremely depressed) prices of the bonds, and the the stockholders mostly wiped out, as AIG’s were?

And how much money could we save by requiring the companies to fire all their lobbyists and end all their contributions to right-wing causes? If the executives want to fund global-warming-skeptic propaganda out of their own pockets, that of course is their First Amendment right.

It’s worth recalling that the Big Three would be solvent today if they hadn’t had to worry about retiree health insurance costs, and that one reason Hillarycare was such a bad plan overall was that it had been torqued around to benefit Detroit. But when Newt Gingrich and Grover Norquist ordered the companies to oppose the plan that would have saved them from bankruptcy, the executives remained loyal to their side of the class war and the ideological battle rather than to their stockholders and employees. If they are to be spared the bankruptcy they have so thoroughly earned, at least they should be prevented from getting into any further political mischief.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: