Conservatives Are Making the Wrong Argument on GM and Rick Wagoner

If we're bailing out, we might as well be smart about it.


By Robert Schlesinger, Thomas Jefferson Street blog

Reading through some of the conservative blog-reactions to the announcement that the administration has decapitated General Motors while giving both GM and Chrysler a firm deadline, it strikes me that they are still stuck on the last auto debate—whether to bail out the automakers at all.

Once we cleared that hurdle, the administration's actions are broadly sensible (though it's still not clear whether that's true in the particulars).

"The government is not competent to pick winner and losers," Mark Steyn blogs at NRO's The Corner.

Sorry, but that train has left the station. (That car has already rolled off the assembly line?)

The government got into the picking-winners-and-losers game when it decided in favor of bailing out—or trying to bail out—the auto industry. Once you go down that path, the new moves make sense. It would not make sense to simply hand gobs of money over to the automakers without strings. That would be the very definition of throwing good money after bad (the companies are reaping the fruit of their own bad strategic decisions). There have to be conditions, or to use the jargon from the administration's viability determinations for the two companies, "Loan and Security Agreement."

Neither company has met the conditions laid out in the agreements. The administration then has three options: Cut the automakers loose, simply keep pouring money in, or find some middle ground. In this case, the middle ground entailed ratcheting up the sense of urgency on the two companies by giving them final, firm deadlines, toughening the required reforms, and mandating change at the top—oh by the way: most Americans favor getting rid of the senior management at companies getting bailed out—of GM (that Chrysler's chief has been spared is probably a sign less of confidence in the company than in certainty that it is beyond help at this point).

Now that said, the proverbial devil is in the details. Just because CEO-canning interference is necessary, it is not necessarily advisable—and can easily be done improperly. Marc Ambinder raises a number of concerns about the details here, as does Jonathan Cohn.

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