General Motors and Twenty Billion Tiding Them Over

John Stewart asks why we gave General Motors twenty billion dollars just so they could go bankrupt six months later. Dick Cheney has the answer:

"I thought that, eventually, the right outcome was going to be bankruptcy," Cheney said of the company during the second part of interview with Fox News' Greta Van Susteren that aired Tuesday night.

"[GM] had to go through such a dramatic restructuring to have any chance of survival that they had to be able to renegotiate labor contracts and so forth," he said. "And the president decided that he did not want to be the one who pulled the plug just before he left office."

Cheney said that rather than acting on GM, the Bush administration "put together a package that tided GM over until the new administration had a chance to look at it."

Or playing the game of kick the can as a co-worker called it. So rather than good policy or dealing with it directly, or just consulting with the next Administration as to how they want to deal with it, we spend twenty billion dollars instead as a carry over so it doesn't happen on your watch.

The Washington System does not have as obvious a convention of 'caretaker government' as the Westminster system does, probably because the Westminster executive controls both the Executive and Legislative and can push through money bills. However there is an element of caretaker government in the change over of control of the Legislature in the Washington System, and to an extent in the Executive.

It is possible this was seen by the Bush Administration as a caretaker role and not making 'policy' in the remaining period before the Obama Administration took over. Given the overt political nature of the Bush Administration, and the general level of incompetence as well, I seriously doubt it.

Permalink, General Motors and Twenty Billion Tiding Them Over, Jun 2009, cam

John Barrdear: I agree that it was kicking the can down the road, but I think it was the correct decision all the same. It was too close to the Lehman collapse. If GM had been booted suddenly into bankruptcy after another one of the "Paulson weekends," the markets would have gone pear-shaped fast.

The Obama administration had two incentives to go along with it. Politically, they had to be seen to be trying to "save" GM and Chrysler from bankruptcy (it's a Democrat whitehouse, after all). Economically, they had to be careful not to spook the absurdly fragile markets with any sudden move to Chapter 11. The end result was the tortuously slow sliding to the inevitable, but this way Michigan will still vote Democrat and we avoided a second kidney punch to the financial system.

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