The U.S. Treasury Department has denied a request by General Motors for $10 billion in federal bailouts to help prop up its sagging finances. Instead, the lame duck Bush Admininstration will focus on helping U.S. carmakers with the $25 billion loan program already approved by Congress to help them shift to more fuel efficient vehicles.
GM had lobbied hard to the $10 billion, apparently encouraged by the way the $700 billion bailout program has morphed several times in recent weeks. The first draft, outlined in a spare two and a half pages of text that wouldn't have gotten the Average Joe a used car loan, was voted down by Congress. When a more advanced version was passed, it was intended to buy up toxic debt and thus free the financial industry from some ugly and massive liabilities.
Then, Paulson let the big banks use the money to sell the U.S. government preferred shares of their stock. That expanded to a host of regional banks and now it appears that insurance and speciality financing firms will enjoy the public money largesse.
But how much is enough? If Treasury lets automakers draw down the money chest, who's next? Fast food? Software? Dry cleaners?
The issue now is what happens to GM. The Detroit firm's executives say they are too big to be allowed to fail. But then, they have dug their own grave, haven't they?