Should Taxpayers Cover Detroit's Tab?

Friday's Wall Street Journal just may have broken the code regarding the possible new workings of capitalism in our country: The winners get to keep their loot, and the losers' miscues are covered by the rest of us.

Or at least that appears to be the case if you take seriously the paper's lead editorial, which is titled "The Next Bailout: Detroit." With the likes of Bear Stearns, Fannie Mae (NYSE: FNM  ) , and Freddie Mac (NYSE: FRE  ) having set recent precedent, it appears that Ford (NYSE: F  ) , General Motors (NYSE: GM  ) and Chrysler may have sidled up to a string of politicos, including officials of the Bush administration, with an eye to getting some public blocking for an end-run around their badly played risk-reward game.

It seems that plans might already be afoot for We The People to lend the threesome about $25 billion at approximately one-third the rate they'd have to ante up without our cosigning. There also would be other candy in there for the car companies as well.

My reaction to all this is that, if we can just spread the net wide enough, the markets can head south to their hearts' content -- as they have on many days in the past several months -- and we can all be tranquilized by the assurance that whatever happens, we've passed along the risks of our bad decisions to our fellow taxpayers. In fact, since the automakers today are being hit by, among other things, bad approaches by the feds that have clobbered the dollar and pushed energy prices to unheard-of levels, why don't we also tuck Delta (NYSE: DAL  ) , Continental (NYSE: CAL  ) , and AMR (NYSE: AMR  ) into this cocoon of unconcerned care and comfort?

Here's hoping that my Foolish friends realize when their legs are being pulled. As an avid free-marketer, I feel strongly that the citizens of the U.S. of A. have no obligation to prop up either the executives of or investors in businesses that have been run badly. The market's been as tough as my old Marine Corps boots lately, but I continue to believe it's elemental that we all invest with the notion that, just perhaps, all our picks may not rebound to our profound benefit.

You'll likely not be shocked to learn that GM and Ford have both been relegated by Motley Fool CAPS players to single-star infamy. Why not drive by with your opinion?

Fool contributor David Lee Smith owns nary a share of any of the companies mentioned. He does, however, welcome your questions or comments. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On August 22, 2008, at 3:55 PM, billblattner wrote:

    I believe they should get bailed out if and only if they give back there fat salaries over the last 20 years, in other words all the money over $125,000 a year for the past 20 years.

  • Report this Comment On August 22, 2008, at 4:00 PM, RFN98 wrote:

    The cat's out of the bag here - the bailout of Wall Street has created a precedent. Even without recent events, a prudent Government would need to look at the impact of lost jobs and the resulting ripple effect in a major manufacturing sector. The Big 3, though severely weakened are still much more important to the nation's economic well-being than Bear Stearns, Fannie or Freddie.

  • Report this Comment On August 22, 2008, at 4:15 PM, rharri10 wrote:

    It all depends if you want the ability to fight a conventional war. Who saved our ass during the WW11. It was our manufacturing base that's who. If you just want to push a few buttons, then let all our manufacturing go down the tubes.

  • Report this Comment On August 22, 2008, at 4:18 PM, fliegeroh wrote:

    Well then, why not just nationalize our auto industries and banks? That way us poor working stiffs get to share in the good times too, instead of just the bad. Hell, let's go socialist all the way, not just for the rich.

  • Report this Comment On August 22, 2008, at 4:59 PM, 4grey wrote:

    I'd rather see my tax dollars help bail out Ford and GM (which are synonymous with America as far as I'm concerned) than waste them on other government programs .

  • Report this Comment On August 22, 2008, at 5:05 PM, FOOL1MILLIONxOVR wrote:

    Tax Payers aren't footing the tab. They are guaranteeing the loan. Ask the right question without distorting the facts.

    And for all you people who think the US can remain an economic superpower without manufacturing, better plan on future helpings of rapid inflation and becoming subservient to foreigh powers.

  • Report this Comment On August 22, 2008, at 6:28 PM, WhosNext2 wrote:

    Let's nationalize the airlines as well.After all the government bailed the railroads out in the early 70's as well.

    Conrail ring a bell? Amtrack anyone?

    The corporate leadership gets a pass for their ineptitude while the employees get their pay and benefits slashed, lose their retirement and end up with nothing for their decades of service other than a broken promise.

  • Report this Comment On August 22, 2008, at 9:39 PM, SamCoach wrote:

    As much as I hate seeing public money going to private companies, the US automotives need help. The Big Three are the largest private providers of health care benefits in the world, in fact GM alone employs, and provides health care benefits to more Americans than ALL the foreign car companies combined! Even with all the plants closings that GM has announced, GM has more assembly plants in the USA than ALL the foreign car companies combined, and Ford has more assembly lines in America than all the fioreign car companies combined. The big three spend over $17 billion a year in research and development which is more than all the pharmacuetical companies and NASA. Losing or greatly reducing the presence of the the Big Three would be devastating to the US economy.

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