A questionable bailout of America's Big 3 automakers

THE U.S. Treasury's rescue fund, which will now buy new stock rather than old bonds, should be reserved for financial companies only. To spread the jam to General Motors or other carmakers, as national Democratic leaders now suggest, is to forget why we are doing this.

Finance is the custodian of other people's money. Its products are written promises. If suddenly people come to believe their money is not safe, and no promise may be trusted, finance stops. In a panic, all of it stops, because the companies are connected by chains of financial obligation. A stoppage results in a dead engine that needs restarting.

Manufacturing companies are not wired together that way. Their failure poses less of a risk to the system as a whole. Failure is often not total. When a company falls into bankruptcy, sometimes its debts are forgiven or a labor contract is changed, and the company restarts itself, or is sold. Even when it closes, its assets may be used by someone else.

It would be painful for any of this to happen to General Motors, Chrysler or Ford, but bankruptcy has happened to large American companies before, and the country is healthier for it.

Bankruptcy cancels unpayable claims. It ends unsustainable practices. It is harsh, but it is a way of recognizing reality and adjusting to it.

A bailout is the use of public money to continue a venture people will no longer sustain with their private money. A bailout can be justified only if a rescue is worth it to the country, and that is a hard test to meet.

In the case of General Motors, a bailout would go to a company that has been losing market share for decades because it has been offering fewer cars and trucks people wanted to buy. The company has also signed labor contracts that are unsustainable.

Supporters of a bailout argue that government can use it to force companies to develop hybrids and other alternative-fuel cars. But it has done that already with tax credits for buyers — a program Toyota made such good use of that no more credits are available on any Toyota or Lexus product.

Because GM introduced hybrids later and has sold fewer of them, you can still get a tax credit on a 2008 Chevy Tahoe, Malibu or GMC Yukon. The program favors GM already.

A bankruptcy by one of the Detroit companies, or several of them, would not end the car industry in America. People will still buy cars, and most of those cars will be assembled here. A new American car company could rise from the wreckage of the old ones.

And don't forget the transplants — Toyota, Nissan, Honda, BMW and the rest. They employ 113,000 Americans to assemble cars in the United States. None of them is asking for a bailout.