This month, the Obama administration announced it had sold its shares in automotive giant General Motors.
The move means the United States government is now officially out of the car business — after what it says was a $10.5 billion loss. The administration hails this as a small price to pay for preventing millions from losing their jobs.
It’s true that, in the scheme of things, $10.5 billion is a drop in the bucket of federal spending. It’s also true that the bailout helped GM get back on its feet, and some people who might have lost jobs kept them.
The problem is that the real costs of the bailout are both higher and hidden. For one thing, bailing out a carmaker was certainly not what Congress had in mind when it passed the Troubled Asset Relief Program. For another, the political nature of the intervention ensured that when the claims were sorted out, politics guided the decisions as much as economics. That’s why the United Automobile Workers Union made out and certain creditors did not.
Then there are the costs paid by those that didn’t need a bailout: notably, Ford, as well as foreign automakers with plants here. Presumably, they all lost sales and market share and profits when the federal government intervened on behalf of their failing competitors. And had GM gone through the regular bankruptcy system, it would itself be stronger today.
That’s because the bankruptcy process reorganizes companies or places their assets in the hands of those who can make them productive. We’re glad our government is out of the car business. Pity we’ll never get an honest accounting of the full costs.