Auto Bailout

In 2008 President Bush arranged (from TARP funds) for a $13 billion bail out of Chrysler and GM. Then President Obama's added funding, bringing the total to over $50 billion. Then and now the moral hazard* argument is raised by opponents of government intervention in spite of the apparent success of the action.

Within two years Chrysler had repaid it's smaller loan of $6 billion and the company under new ownership has prospered.

It took two more years for GM to regain it's financial footing and repay the bulk of its loan. The government will have to absorb a $10 billion loss from the deal that included concessions from unions, creditors, suppliers and dealers.

Was it worth it? Some people maintain that the companies might have survived in some other form arising out of bankruptcy. The operative words are might have.

What is fact is that GM currently has 88,000 directly employed workers as well as causing their suppliers to create or maintain hundreds of thousands of jobs. The annual government revenue from the wages of these workers have probably far exceeded the $10 billion loss.

Precedent: In 1983, Chrysler paid off the loans that had been guaranteed by US taxpayers in 1979 and the Treasury was also $350 million richer. http://uspolitics.about.com/od/economy/a/chryslerBailout.htm

*The expectation that a company will make risky decisions if it feels that the government, in this case, will rescue them.