GMAC “Needs” More Taxpayer Help

American taxpayers, who have already bailed out GMAC (a consumer finance company partially owned by General Motors) twice, may be hocking over more money very soon. The company is in talks with the government to get the money without letting the government have too much control of the company. According to The Wall Street Journal, at least $2.8 billion is likely to be injected. GMAC is formerly the financial holdings arm of General Motors, and is currently a bank holding company.

As a libertarian-leaning conservative, I’m all for government not having control of much. However, this stance by GMAC is going too far. If they wants another bailout, the executives will have to eat some humble pie and stop pretending they have a leg to stand on with negotiations. Despite what Michigan Democratic Senator Debbie Stabenow said last year, the $25 billion that slipped under the radar during the TARP debate wasn’t small, nor was the bailout GMAC received last December from the Bush adminstration. GMAC should have two choices: government control or bankruptcy.

I say this for two reasons; first, the board members and executive leaders of the company would be in serious danger of losing their jobs if the government took over. Thus, they would be hesitant to let the government step in. Additionally, since the government has (hopefully) learned its lesson about specifying payments in contracts with companies being bailed out, after the AIG bonus debacle this past spring, their pay cuts and bonus cuts would be absolutely substantial IF they were allowed to stay on. As George Will said in a speech I saw last year, executives should sign a contract stating they make no more money than the President of The United States during the time they are using American taxpayer money.

The second reason only two choices should be offered is that if the executives and board members cannot push their egos down enough to accept full government takeover and readjustment, bankruptcy would allow specialization of resources to kick in. At that point, Toyota, Honda, Ford and the other auto companies (and their respective loan organizations) that have actually done a market-satisfactory job of making vehicles would immediately receive the market share opened by a GMAC bankruptcy, given the influence the company has on the automobile industry. This would decrease the amount of resources- including taxpayer money- used to make cars in this country substantially, and allow greater economic growth to take place as the unused resources are used elsewhere. In what is being called “The Great Recession,” this could be a great boon to hard-working Americans as well as Americans who want to be hard-working but can’t due to the recessionary times.

Personally, I prefer bankruptcy for businesses that can’t succeed. Let’s put the pressure on our legislators to do the same.