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Obama Floats $50 Billion Automaker Bailout

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President-Elect wants to throw (more) good money after bad.

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So much for one president at a time.

Bloomberg reports President-Elect Obama is urging lawmakers to rush through a $50 billion bailout for the struggling U.S. automakers.

With no formal executive power until January, Obama is asking Democratic friends in the House and Senate to get their Republican counterparts behind a rescue plan. Any plan would also require the support of President Bush, according to Bloomberg.

Also at issue is whether the money would come from TARP -- essentially depleting the first $350 billion installment of bailout funds -- or from fresh legislation.

General Motors' (GM) situation is particularly dire, as many analysts believe that the once-largest carmaker in the world won't survive through January without federal funds.

Obama also wants to see emergency loans extended to GM, Ford (F) and Chrysler to buoy their weakening financial position. The President-Elect would appoint a czar or independent board to oversee the companies if the rescue plan becomes law.

A GM failure, which many argue would likely push Ford and Chrysler towards a similar fate, would have dire consequences for the American economy. Parts suppliers, dealers and Rust Belt communities already reeling from the housing slump; years of already lackluster economic growth would be decimated.

It appears the alternative to a bailout is too terrifying to even consider. There is, however, a precedent for bankrupt industries operating their way through restructuring efforts.

After September 11th, United (UAUA) and other defunct airlines flew throughout their bankruptcy. Service was shoddy at best, layoffs were severe, but the industry did not die.

Economic conditions are admittedly more dire now than in 2001, but at some point, the bailout parade must stop. Each company that fails, only to be saved from collapse by Washington, simply pushes genuine economic recovery further into the future.

As Minyanville's Kevin Depew wrote Monday,

"With continued bailouts we will emerge from a lost decade with an economy and society crippled by the cost of bailng out businesses that operated with irresponsibility and a near total disregard for not just taxpayers but for their very own shareholders."

Taxpayers watched the pricetag of AIG's (AIG) $80 billion bailout double in a matter of months. With Ford and GM collectively bleeding over $4 billion in cash every month, it's not unreasonble to think any automaker handout would similarly expand.

At some point, our elected officials may actually have to take a stand. Unfortunately, holding one's breath for that to happen should be considered a serious hazard to one's health.
No positions in stocks mentioned.

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