http://www.eschatonblog.com/2008_09_14_archive.html#151385414956938209Loan
Fed's considering giving AIG a loan. How big I wonder? AIG, we must remember, is primarily an insurance company, with substantial other sidelines, and is very far from the Fed's normal domain which is commercial banks. Fed going to make a loan GM next? Not crazy given its heavy equity in GMAC.
When Chrysler was given loan guarantees of $1.2 billion, about $3.2 billion in today's money, over 25 years ago it was like a nuclear-sized event. And it required an act of Congress.
-Atrios 15:57
Blast from the Past: Cato on Chrysler bail out
http://www.cato.org/pubs/pas/PA00Aes.htmlShould the U.S. government let Chrysler fail? Let's reword the question: Should the government force taxpayers to subsidize a company whose products do not meet the market test? The answer becomes clear: No. Why should taxpayers have to pay to keep a firm in business? As consumers and producers, they have shown that they do not want to keep it going. Consumers are not willing to pay enough for Chrysler's products to cover the company's costs; producers--including suppliers to Chrysler and Chrysler employees--are not willing to sell their goods and services at a cost below Chrysler's projected revenues. Consumers and producers have spoken, and that should be the end of it.
Chrysler executives reply that if the company fails their workers will be unemployed and their suppliers will lose business and lay people off. But surely this unemployment of resources cannot last long: if this were a likely prospect, Chrysler would not be in its present bind. Precisely because the resources have higher-valued alternate uses, Chrysler cannot afford to pay them out of projected revenues. Other potential users of the resources are willing to pay more than Chrysler can. The cost of a resource is its value in the highest-valued alternate use, and therefore to say that Chrysler's costs exceed its revenues is to say that Chrysler resources are worth more elsewhere.
In the event the company fails, Chrysler employees and suppliers would be unemployed for sometime--not, however, because they could not find jobs but because they would want the right job. They would be willing to go without work while searching for the right job because they expect to gain more in income and job satisfaction than they lose in current income.