by Mario Rizzo
The Wall Street Journal reports today that the Republican Administration may agree to a bailout package for the US auto industry that would give the government a large financial stake (“warrants”) in at least GM and Chrysler.
While it is not clear at this writing whether the warrants would be voting, nonvoting, preferred or common shares, it would be a form of ownership. The warrants would amount to about 20% of the value of the loans. The restructuring that will take place under such a deal would necessarily be open to all sorts of political manipulation and rent seeking. A “car czar” (notice how humor is used by the planners to make things seem all friendly and nice) will be appointed by the president to oversee the restructuring. Unlike a bankruptcy judge this appointee will be subject to the winds of political expediency. I hope this plan will die because of political wrangling and disagreement. Nevertheless, it demonstrates where we are. No one in power is counting the long-run costs. The slippery slope is in fine form.
UPDATE: There is a good complementary post at CafeHayek.