A Modest Proposal

There has been considerable recent discussion about whether or not to extend the current government bailout of the banking industry to include the "Big Three" automakers. The Congress is, at the moment, opposed to this idea on the grounds that the government has no responsibility for the incompetence of business executives in the private sector. But, since this august body will be dominated by members of the Democratic Party in about six weeks, the prospects of this new bailout are growing more favorable with each passing day.

It has occurred to your humble correspondent that there is indeed a way for both factions in this debate to claim victory so that Congress may quickly return to the business of government (running for re-election). I would like to make the following modest proposal in the hope that even a Congressman from New Mexico can understand it and appreciate its simplicity. To quote W.C. Fields, "It is time to take the bull by the tail and face the situation."

Why not require the banks that have just received 125 + billion dollars in what was once the taxpayers' money simply loan the automobile industry whatever amount of money it needs?

There are several immediate and long-term advantages to requiring the banks that were recently bailed out to, in turn, bail out the Dunces of Detroit.

First of all, it wouldn't cost the taxpayers any more money. The cash that the government used to "purchase equity" in the country's largest banks is more than enough to cover loans to the auto industry. In fact, the banks have enough money on hand as a result of the bailout to buy Nicaragua, Guatemala, Panama, and a sizeable chunk of Mexico! The $20 billion that the Big Three wants is a drop in the bucket! As a bonus, the banks would hold the mortgage on the City of Detroit, the Pistons, and the Tigers.

As a condition of these loans the banks would, of course, be granted a voice in how the auto industry conducted its business. This would be a good thing since banks, by their very nature, are conservative and have a strong dislike for anyone that is sucking up a salary but not doing anything. As a result, the shop stewards from the UAW and an army of middle managers would be out of a job unless they went back to the assembly line.

Another reason for having the banks bail out Detroit is that once the banks had a vested interest in the automobile industry, it would be to the banks' advantage if the Big Three sold a lot of new cars. The banks would then have the incentive to loosen credit by making more new car loans. Given that the quality of cars produced by the auto industry leaves something to be desired, the "trickle down" effects of the banks' new car loans would assure that auto mechanics, tire dealers, and auto parts stores will have all the business that they could handle.

Finally, the banks would be demonstrating their commitment to the economic policies of the upcoming Obama Administration's Brave New World: they would be spreading the wealth around.

The banks, of course, are not going to loan the Big Three this money out of some noble sense of purpose or out of the goodness of their corporate hearts: they want to be repaid.

Look at it this way. The banks have to pay interest, which is currently 5%, on the money "invested" in them by the government. The banks will make a profit by simply charging a higher rate of interest on the money that it loans the auto industry. The Big Three will treat the interest charged to them as a business expense, write it off their taxes, and then raise the price of a new car to cover their losses.

Care to take a guess at who winds up paying for all this?

Correct! We do!

If this banks-loans-the-auto-industry-the-taxpayers-money Ponzi scheme actually works, then maybe the banks could loan money to the Amish horse-drawn buggy industry. The buggy is, after all, environmentally friendly in that it doesn't use fossil fuels, contribute to noise pollution (when was the last time you heard rap music blasting from an Amish wagon?), and more buggies would drastically lower the number of fatal auto accidents!

As P.J. O'Rourke once said, "Giving money and power to government is like giving whiskey and car keys to teenage boys."

I think we're about to prove that he was right.