TARP and Rent Seeking

I was not sure that the TARP fund was a good idea. But I am really not supportive of using the TARP to bail out all sorts of industries. The auto makers in the US are trying to make the case that their financial problems have been caused by the problems in the financial industry.

This is while most analysts argue several cases which make that plea nonsense. For example, most financial analysts suggest that the (not so) Big 3's labor costs are way out of whack with the rest of the auto industry either in this country or around the world. Most believe that the current dealership system in the US has way too many dealers. Most think that while the Big 3 have made some improvements in their production and design that they need to do more. And then the CEOs of these companies jet to Washington to ask for a handout.

The Mayor of Lansing was on the radio making the stupid case that a) the Chrysler loan of a couple of decades ago was a good deal for the taxpayers and b) that if we let the companies go into bankruptcy that all sorts of devilment will reign down on our country. The Mayor should understand a couple of things. First, the Big 3 are less important than they once were and if they do not restructure significantly they will be even less important than today. Second, most of what he says is baloney. What needs to happen is the Big 3 need to work on their products and their management and their labor contracts and they could better do that without a bailout from the government. I say let them restructure under the bankruptcy system rather than becoming wards of the state.

Grant Bosse at NH Watchdog comments "Bailing out the Big Three is subsidizing failure. And you only subsidize something when you want more of it."