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Preventing Fallout from the Bailout

December 21st, 2008 by Bill Brown · 3 Comments · Politics

Reading the GM bailout term sheet, I am struck by the political nature of the loan. Most lenders would care about payment schedules, interest rates, and profit and loss statements. The Treasury Department focuses on more nugatory matters:

  • Eliminating golden parachutes
  • Canceling executive bonuses
  • Allowing federal clawbacks
  • Selling off any private aircraft
  • Restricting holiday party and other event spending
  • Limiting spending on outside consultants
  • Pegging prevailing wages to Toyota, Nissan, and Honda’s prevailing wages
  • Matching work rules to Toyota, Nissan, and Honda’s work rules

Each of these is like a response to a news article or exposé from the past several months, designed to prevent future embarrassment. The executives at GM and Chrysler should be embarrassed to have consented to this. And officials at Treasury should be embarrassed at this overreach of their authority, this precedent-setting expansion of government interference into the economy. Sadly, none of them will be made to feel ashamed by the media, by Congress, or by the public even.

3 Comments so far ↓

  • L-C

    “I am struck by the political nature of the loan. Most lenders would care about payment schedules, interest rates, and profit and loss statements.”

    They’re not in it for the business, but for the control. It’s a lion doing what lions do: acting in accordance with its nature. The nature of government is force.

  • Myrhaf

    Golden parachutes, bonuses, and aircraft are there to attract the best talent, which in theory will increase profit. The government wants these things gone because they get bad PR. This is a classic example of what Mises wrote about in “Bureaucracy.” The government does not use profit and loss as a standard.

  • Bill Brown

    I am struck, not surprised. The terms of a normal loan are rational and relating to getting paid back. For the government, it’s an entreé for greater control, voluntarily consented to.