Monday, June 06, 2011

David Skeel: The Real Cost of the Auto Bailouts - WSJ.com

In the Wall Street Journal, David Skeel goes through some of the details of why the auto bailouts were a bad, and costly, idea, despite the fact that the President is praising them and claiming credit. But I think that the most important point is this one:
The claim that the bailouts were done at little cost is even more dubious...The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors' normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.
Read it all.

The Law of Unintended Consequences doesn't ever go away. Some of the results of any action are going to be results that weren't intended, and some of those are going to be undesired. And sometimes they're easy to see. This is one of those times...

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