The Corner

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Dots and Dominoes


Detroit, Mich. — My friend Joe Lehman, President of Michigan’s Mackinac Center, one of the country’s premier state think tanks, made this comment to me after watching Thursday’s auto bailout hearings:

How come nobody connects the following dots:

1. Massive bank problems precipitate a $700 billion federal bailout.
2. Meanwhile, private companies (including automakers) find it difficult to get banks to loan them money.
3. So those private companies go to the feds for bailouts of their own.
4. Nobody says: “The federal government won’t bail out companies that can’t get private loans. That’s why we gave the money to the banks, so the banks could make private loans. Loan money is what banks do. If you need money, go see a banker. We gave them lots of money they can loan out. Maybe they’ll loan some to you.”

Am I missing something?

An excellent point. So I put it to some auto supplier and finance sources, and this is what they say we’re missing: The federal credit bailout ain’t working.

Credit is still frozen. No banks are willing to lend. And the auto companies are still in free fall.

These sources connect the dots this way:

1. GM and Chrysler go bankrupt at the end of December.
2. As a result, they suspend billions in payment obligations.
3. Their massive supplier chain falls like dominoes as one supplier after another goes bankrupt without the payments.
4. The economy gets sucked further under water.

But if the $700b credit bailout didn’t work, will the $34b auto bailout work? And for how long?

 — Henry Payne is an editorial cartoonist and writer for the Detroit News.