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Tuesday, December 9, 2008

The Auto Bailout and the Socialist Vicious Circle

Clusterstock's* Joe Weisenthal points out that the leverage this auto bailout gives Congress extends much farther than just leaning on the auto industry. Because Chrysler is owned largely by a private equity firm called Cerberus, Congress feels it has the right to tell Cerberus what to do with the rest of its investments.

As NYTimes' Dealbook tells it:
Steve Kagen, a Democrat lawmaker from Wisconsin, said on Monday that he would not support any taxpayer money for Chrysler until two paper mills in his state are re-opened. The mills are owned by NewPage, which is controlled by Cerberus, the same investment firm that controls Chrysler and GMAC, the financing arm of General Motors.
This is why the bailout mania we're undergoing now will utterly transform our economy forever. Now that Congress is paying the piper (with my money), Congress is calling the tunes. It will only get more severe, and there's only so much objecting a free-market advocate can make to these conditions.

Are we really going to argue that unconditional bailouts are superior? Do we really think these companies should be able to do with our money whatever the heck they want?

Of course, Cerberus would lose money if they reopened the uneconomical plants Rep. Kagen wants them to reopen. Well, then they just need more bailouts.

You see where this is heading.

*Clusterstock managing editor John Carney is my brother.

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