Saturday, August 23, 2008

Capitalism for us, Socialism for them

American automakers want a bailout, in the form of a $25 billion dollar government-backed loan:
The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.

Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said.

Oh wait, make that $50 billion:

Aug. 22 (Bloomberg) -- General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.

Here's what Yglesias has to say about that:
On a somewhat less jokey note, observe that at the moment the entire market capitalization of General Motors is just $5.91 billion. If it’s genuinely the case that access to a low-interest line of credit would turn GM around (I have no idea if this is true), the government could easily afford to buy the company, use the government’s ability to borrow at low rates to effect the turnaround, and then re-privatize it for a profit. Not saying that’s a good idea, but it seems like a better idea than giving loan guarantees to firms that are objectively bad credit risks. On the other hand, Michigan’s a swing state so who knows what the possibilities may be.
Um, dude. I propose an alternate plan: let's give all GM, Ford, and Chrysler workers some government-backed loans so they can go to college or get job retraining or just support their families while they find new lines of work. And let the corporations sink or swim as they can. For once, let's let the corporation slip through the cracks and throw the lifeline to the people.

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