President Bush's alleged rationale for throwing $17.4 billion of taxpayer money at Detroit's automakers this morning was that, given the current credit freeze, these companies have nowhere else to go to fund an "orderly bankruptcy."
But the fact of the matter is that at least one of these companies, Chrysler, didn't have to go elsewhere. Chrysler's parent company has plenty of money at hand. That it chooses not to use it speaks volumes about its confidence in Chrysler's future viability.
Chrysler was bought over by Cerberus – a private equity firm – last year. As Dan Gerstein points out in this scathing commentary in Forbes.com, Cereberus' $2 billion stake in Chrysler represents only about 7% of its assets. That means that it has tens of billions of dollars at its disposal to engineer its own private bailout of Chrysler. Yet, Gerstein notes, "The company has not offered to put any of its money at risk to match the government relief dollars and show good faith to the taxpayers."
Because it understands the folly of putting good money after bad: Chrysler's management is clueless; its unions are suicidal; and the auto market for the foreseeable future is in a deep freeze. The idea that Chrysler could make a comeback under such circumstances – when it couldn't do so during a booming economy -- would represent more than an SUV-full of triumph of hope over reality.
So anyone want to wager an Aspen that, come March, GM and Chrysler will arrive in Congress not with "viability" plans in hand as Bush is demanding – but an outstretched palm for another bailout? And anyone want to wager two Aspens that the Obama administration – and its Democratic Congress – will oblige? But worry not: They will demand plenty of green cars to shove down taxpayer throats in return.
How does one spell "tax-payer ripoff"?