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Erbe: If Citicorp, Why Not GM?
Bonnie Erbe 11/26/2008
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It will be years before we know whether government bailouts of financial and other institutions were a good idea or not. While we're in the midst of bailing out the planet (or so it seems) one question comes to mind. If Citicorp, why not GM?

Congress will hear from the big three automakers next Tuesday on whether to bail out the auto giants and meanwhile, their executives are devising a business plan to explain to members of the House and Senate how taxpayers' dollars will keep the companies, including GM, alive. But if the U.S. government is going to bail out Citicorp, the once-largest bank in the country, why not do the same for GM, the once-largest automaker in the world?

Former Labor Secretary Robert Reich has some great thoughts on the topic. In a commentary for Marketplace Radio, he notes Citicorp has lost a huge chunk of market valuation, which hurts the company's executives, shareholders and creditors. But if it went into Chapter 11, mutual fund shareholders and people holding Citicorp CDs would have their assets protected. If GM tanks, on the other hand:

"...General Motors has a far greater impact on jobs and communities than Citigroup. Add parts
suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples of Citi. And the potential social cost of GM's demise, or even major shrinkage, is much larger -- including entire communities whose infrastructure and housing may become nearly worthless."

As we have heard by now, the ramifications through the U.S. economy would be massive if GM were to collapse. Jobs---high-paying factory jobs---would leave our now service-oriented economy never to return to the U.S. Job losses, with parts suppliers and other subcontractors included, would number more than 2 million. Those jobs would be resurrected in developing nations where labor is much cheaper. Why help other countries to feast on the carcass of our once-strong manufacturing sector?

Congress should not go easy on GM if it does approve a bailout, but Congress has shown no sign of going easy on the auto giant. The idea of setting auto executives scurrying to produce a business plan is nothing short of brilliant. I've got suggestions for what such a plan should include. But first and foremost it should be focused on one word and one word alone: green.

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