The Three Ps: Why Bailouts Are Problematic U.S. automakers are trying to secure billions of dollars in government loans in order to bail out the industry, but the idea doesn't sit well with veteran auto reporter Paul Ingrassia. The problem with bailouts, Ingrassia says, can be summarized by three Ps — philosophy, practice and precedent.
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The Three Ps: Why Bailouts Are Problematic

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The Three Ps: Why Bailouts Are Problematic

The Three Ps: Why Bailouts Are Problematic

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The presidential candidates may favor Detroit's efforts to borrow money from the government, but the idea of low-cost loans does not sit well with others. Among the critics is veteran auto reporter Paul Ingrassia.

Mr. PAUL INGRASSIA (Veteran Auto Industry Reporter): When you think about it, it's very problematic from a philosophical sense, for practical reasons, and certainly for reasons of precedent.

INSKEEP: Let's go through each of those. What's philosophically wrong?

Mr. INGRASSIA: Well, philosophically wrong: Whenever you mix public risk with private profits, you run into problems. I mean, did someone say Fannie Mae and Freddie Mac here? You know, essentially, the executives that ran those companies were allowed to make very risky investments and then just be bailed out by the federal government.

INSKEEP: And is this a bailout if the federal government ends up making low-interest loans to car companies?

Mr. INGRASSIA: Well, of course it's a bailout. I mean, it's basically giving taxpayers' money to Detroit.

INSKEEP: You went on to say practical problems. What practical problems are there given that the federal government has stepped in and helped auto companies before?

Mr. INGRASSIA: Basically is - the only reason to do it is if there's a huge systemic risk to the U.S. economy or financial system. So what's the risk we're trying to avoid here? Are we trying to avoid the risk that Americans will have to drive Hyundais and Hondas? I don't quite understand that. The truth of the matter is...

INSKEEP: Maybe we're trying to avoid the risk of an America where nobody builds anything anymore?

Mr. INGRASSIA: Well, that's just not the case, frankly. I mean, parts of the U.S. auto industry are thriving and expanding. Toyota, Nissan, Hyundai, and Honda and other companies have all built big, new factories and made massive new investments in the United States and built things and are building things here. So I don't really see why we have to step up and subsidize the car companies when the truth is investments are being made in the U.S. auto industry.

INSKEEP: And so what is the bad precedent, the third of your Ps?

Mr. INGRASSIA: Well, Steve, where do the bailouts stop? I mean, look, newspapers are in trouble, too, right now, correct? Newspapers are folding. They're laying off people. So should we bail out newspapers? Basically, bailing out anybody that gets into trouble is a good way for the society to go broke.

INSKEEP: Is there something to be said for the idea that this hybrid technology is simply a good idea, and why wouldn't the government help out a little bit?

Mr. INGRASSIA: Well, I think hybrid technology and alternative fuel systems can be a good idea, but why should the government help out to make private profits? That's what this is all about. Essentially, we trust private enterprise to provide all this stuff. And the truth is, it is happening.

INSKEEP: Although, let me ask about this. If it's seen as socially desirable to have more fuel-efficient cars and alternative fuels for reasons that are not strictly economic, like dealing with global warming or dealing with national security, does the government then have an interest in investing something to make sure that this goes forward more rapidly or more completely than it might through the free market?

Mr. INGRASSIA: Well, why is government investment going to make it happen more quickly and more efficiently and more effectively than the free market?

INSKEEP: I hate to use a phrase "tough love," is that what you're suggesting for the auto industry?

Mr. INGRASSIA: It's a great phrase for it, you know. And the truth is, by the way, I'm putting my money where my mouth is on this. You know, I'm - you know, it's in my personal investments. I've bought some Detroit bonds recently, bonds in the car companies. I think they'll make it. I just don't think that the taxpayers ought to subsidize me.

INSKEEP: Paul Ingrassia, thanks very much.

Mr. INGRASSIA: Thank you, Steve.

INSKEEP: He's a former reporter for The Wall Street Journal, where he won a Pulitzer Prize for his reporting on the U.S. auto industry.

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