Tuesday, October 28, 2008

Let Them Fail

Matthew Yglesias proposes that, rather than provide a federal bailout of GM and Chrysler, which can cost tens of billions of dollars, why not spend the money on the employees of these two companies? I suspect that the cost of administering such a bailout could be prohibitive, but it would depend on the nature of the bailout. If it were simple math, for example (GM has 263,000 full time employees and needs $10 billion, so each employee would get $38,000 cash), to help them relocate, stay in their homes, retrain for new jobs (or go to college), that would be better than giving a lump sum to the corporations that have huge overhead and would likely bleed through the money as fast as AIG did their initial $85 billion.

Letting a firm like GM die its horrible death might end up being a blessing in that case, as the assets would be liquidated and new owners would come in and re-tool. Get some fresh management in there and let's see what rises from the ashes.

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