"we don't have any good blueprint for what we want them to do."

Megan McArdle gets me going. I don't know why. It's unfair, since I basically agree with her, But we don't need a speech about government and the private sector over every issue, do we? :

"Felix Salmon complains, justly I think, that the bailed out financial firms are using the funds to keep their operations going rather than restructure them:

The NYT also, however, has a pointed column from Floyd Norris, who notes the double standard being applied here: while the government is disinclined to give Detroit any help at all, it's much more well-disposed towards companies like AIG and Fannie Mae which are coming back for second helpings of bailout money, after having made clearly insufficient changes the first time around.

It strikes me that this is another problem with a potential auto bailout: we don't have any good blueprint for what we want them to do."

Sorry love, we don't have a blueprint for any of this.

"we do know generally what we want the banks to look like at the end of it: less leverage, better risk management, and probably a better compensation system that calibrates earnings to multi-year and systemic performance. I don't want the government to run the banking system for any number of reasons. But I do think that the government has a roughish idea of what a good bank should do."

Really? Tell what that is. Is lending money part of it?

"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said. "

Brilliant. I guess your right. So, are they lending?

"I don't think we have any legislators or regulators with the experience and flair to design new cars or oversee the marketing program, manage the dealer network or decide which lines to cut or gut rehab. We'll have to depend on management to do this. And the management that will be in charge is going to be, in essence, the same management that screwed things up. "

And AIG and the TARP crowd? They're all new, are they?

"Oh, we can replace the people at the top, if we want (it would probably be a good idea, but I don't know how it would play politically). But American business writing considerably overstates the value of a CEO. Not that being a CEO is easy, or that they don't do valuable work; I venture to say that 100% of the commentators who think that running a major company is a matter of riding around on the corporate jet and stealing from the workers and shareholders would be surprised at how quickly the company sank under them if they were thrust into that cushy sinecure. But while a bad CEO can ruin a good company, it is not necessarily the case that a good CEO can save a bad one."

Tell you what: Thrust me in. I'll give it a shot. If nothing else, I venture to say that you'll enjoy thrusting me. I'll also take a sinecure. Ablative in Latin, by the way. I won't go on.

"My prediction: we will get an auto bailout, probably as soon as Obama is sworn in, though possibly sooner. It will not involve the kind of massive job cuts and plant closings that most analysts who do not work for GM (or the UAW) believe are necessary to make the company viable again. Possibly the company will go into bankruptcy, burning the creditors, but any planned bankruptcy will involve shielding union contracts from a serious cramdown. Top management will be fired, and the rest will have their salaries cut or frozen, causing the most talented workers to flee for other industries. The company will burn through the money, and be back asking for more from Congress before Obama's first year is out.

The best case scenario for GM, and the worst case for the rest of us, is that the bailout involves the government assuming many of its legacy obligations at enormous ongoing expense. This will help, but not erase the fact that Detroit has capacity to build at least 50% more cars than anyone is currently willing to buy."

Now you're a seer. You're might well be right. You're not a politician. They're well paid to make mistakes. Lots of them, all in the name of representing their constituents. Felix and Floyd are correct. It's worth considering.

Here's my comment:

A few points:

1) Politically, when you bail out an industry, you come up against the argument that we need help, and we're more important than the industry you saved.
2) If you've changed your mind any number of times, your deciding to draw the line here is going to look arbitrary, stupid, and smack of cronyism.
3) Political Economy is not the same thing as economics. It includes a moral and philosophical dimension. It is entirely appropriate to argue that saving jobs or even some businesses for a another chance or even to defer massive dislocations is worth spending the extra money. It is a moral and philosophical, as well economic issue.
4) Saving banks run by buffoons who are either insolvent or close to it isn't going to help the argument that decisions in the private sector are any smarter than government decisions. The usual reasoning is that however smart or stupid decisions are in the private world, they should be confined to what you own or run. Thousands of businesses don't make it. Sadly, in this case, they were not so confined.
5) The ship on government intervention has sailed. It's so far out to sea that we can't see it anymore. For those reasons, I would accept a government bailout if the management was replaced. Whoever we pick will probably make a pig's breakfast of the whole thing, but, compared to TARP, that would be an improvement. It's a compromise brought on by a series of foolish decisions, but not a peculiarly awful one. It could well be that the automobile business is dying, and we're delaying the inevitable, but we do it everyday,for as silly a reason as common humanity.

Posted by Don the libertarian Democrat | November 14, 2008 7:23 PM