The Big 3 Takeover

The Wall Street Journal reports that Congress and the Bush administration are poised to move on the scary corporatist bailout package for decrepit Detroit automakers:

Congress and the White House inched toward agreement on legislation that would throw a financial lifeline to the Big Three auto makers, giving the government a substantial ownership stake in the industry and a central role in its restructuring.

Under the terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government’s $700 billion rescue of the financial industry.

Assuming congressional Democrats and the White House come to agreement on the plan, the car industry would be the latest to submit to strict government scrutiny in return for a bailout, joining most prominently the banking sector.

The auto industry would undergo a restructuring process akin to bankruptcy reorganization, only with fewer rigors and with the government, not a judge, in control, and with many associated political complications.

The program would be overseen by an official, tapped by President George W. Bush, whom congressional aides and lawmakers describe as an “auto czar.” This person would act as a kind of trustee with authority to bring together labor, management, creditors and parts suppliers to negotiate a restructuring plan. He or she also would be able to review any transaction or contract valued at more than $25 million. […]

The auto czar scheme cannot possibly succeed. It is merely politicians throwing good money after bad, as the saying goes. Governments can’t run businesses properly nor should they be allowed to try. It’s not what they’re good at it or suited for. The approach was tried in the Soviet Union and in a variety of Fascist states and it always, always, always failed.

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