The one domestic automaker that has paid its own freight could end up penalized for its success, while the government indefinitely subsidizes competitors that would have died without government aid. Without the GM and Chrysler bailouts, there would be a vast surplus of unemployed autoworkers. But since the government saved thousands of jobs, the unions have more bargaining power, which they seem poised to use against a company that has stayed off the federal dole.
But the domestic auto industry is still a mess, and the huge subsidies at Chrysler and GM could inhibit an overall return to profitability rather than accelerate it. The same dynamics are at play in the banking industry, where bailed-out giants like Citigroup, GMAC, and Bank of America are sitting on billions in reserves that healthier banks would be able to lend, stimulating a recovery. In the investment banking business, by contrast, the demise of Bear Stearns and Lehman Brothers has left survivors like JPMorgan Chase and Goldman Sachs nicely profitable, which--like it or not--has to happen if the overall economy is going to get healthy again. It's awful to watch companies fail and jobs disappear. But the alternative, we seem to be learning, is to watch them fail in slow motion, while contaminating those with the best chance to succeed.
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