Emergency Funds for GM?

Bailing out banks is very bad. The problem with what has gone on the past few months is a textbook example of why governments should never be involved in business. The US government has regulated banks and targeted various sectors for investment, particularly housing, over the past several decades through these vehicles. Now that the government has been so involved, who can blame banks for behaving the way that they did since this is the environment that the government created for them. Now the taxpayer is on the hook for bailing out these firms that I think acted the way that one should act within the environment that the government created.

Also, its important to note, the Lehman did go bankrupt and Bear Stearns did too since all equity holders were effectively wiped out. But, banks are a different story, unfortunately. Without a banking system, a country doesn't have a economy. But an economy can exist with out specific industry.

The argument for a bailout of GM? I just cannot see it. GM can operate under debtor-in-possession financing (DIP) and the government can participate in that. See, what the government is proposing here is that they will lend these car companies money and then get to manage and direct how these organizations are going to operate. Who are they kidding? It will go from awful to excruciatingly awful.

The problem here is that car companies have 3 options to get the financing that they need:

1. From investors- that will just not happen. No one should have confidence in their abilities and with the government involvement, politics will drive decision making in the future and not good business sense.
2. From the government- money can be forthcoming from the government but this is just delaying the inevitable. I also think that these companies will only become pawns of policy and not real business organizations. The foreign car manufacturers will continue to gain market share since the big three will be making cars to please legislators and government officials and not consumers.
3. Bankruptcy- money is forthcoming in bankruptcy using something called DIP financing. A third party, in this case a judge, listens to the various stakeholders and moves these productive resources to those that he thinks can create the greatest value.

None of these 3 is optimal, but in my opinion, the most effective one and the most efficient one for the long-term for workers, for American taxpayers and for the longer-term health of the American economy is option 3, a bankruptcy. It will be the quickest way to move these assets to their most productive value.