Should gov’t be blamed or praised for GM bailout?

Marketplace Staff Nov 18, 2010

Should gov’t be blamed or praised for GM bailout?

Marketplace Staff Nov 18, 2010


Kai Ryssdal: The basics of the GM IPO we’ve known for a day or so now: $23 billion, plus or minus. The government’s now a minority stakeholder — taxpayers own about a third of the company.

But from where the president stood this afternoon in the briefing room at the White House, this is probably the key point.

Barack Obama: We are finally beginning to see some of these tough decisions that we made in the midst of crisis pay off.

It’s worth a mention here that the auto bailout — just like the bank bailout — actually started with the Bush Administration. But the incumbent is getting most of the credit, and maybe some of the blame, too.

Marketplace’s David Gura reports now from Washington.

David Gura: In 2009, President Obama said GM and the U.S. government had found a way to save the car company from collapse: GM would have to restructure.

Obama: Executing this plan will require a substantial amount of money that only a government can provide.

Americans would have to become “reluctant shareholders,” he said.

Obama: What we are not doing, what I have no interest in doing, is running GM.

That didn’t comfort critics, who wondered why U.S. taxpayers should invest almost $50 billion. At the time, Republican lawmaker John Boehner asked whether anyone really believed the government could steer a huge company to economic viability.

M.P. Narayanan teaches business at the University of Michigan. He says it’s clear the government has. And if it hadn’t, a bankrupt GM would be in worse shape today.

M.P. Narayanan: The Chapter 11 would not have been resolved this quickly, and so GM would be still struggling.

Narayanan says the restructuring jobs saved jobs and led to the company to make cars that people want to buy. But taxpayers are still on the hook.

Narayanan: Clearly the government is going to pay a price because it doesn’t look like the government is going to recoup all the investment in GM. It looks very unlikely.

But there are still critics of government intervention. Daniel Ikenson, a CATO fellow, is one of them.

Daniel Ikenson: The costs of the bailout weren’t just the money that was fronted.

He says GM’s bankruptcy would have provided competitors with fresh talent. And federal dollars gave GM an unfair advantage. Worst of all, he says, now businesses in trouble might think they’ll always been able to turn to Uncle Sam for help.

In Washington, I’m David Gura for Marketplace.

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