Saturday, December 26

Was the auto bailout necessary? Did it work?

In hindsight it is readily apparent that the answers are: No, and No.

President Bush argued that the bailout was needed to keep GM and Chrysler out of bankruptcy, because nobody would want to buy cars from the companies if they went bankrupt. There would be questions about whether warranties would be honored, whether dealers would be available for service, and other issues that would come up with a durable good purchase.

We can see that the bailout didn’t work, because after receiving bailout money from the Bush administration, and then another dose from the Obama administration, both companies declared bankruptcy in June anyway. And, because the bailout didn’t work, it’s easy to see that it wasn’t necessary.

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