GM has come forward this morning and announced that the only way they will survive is to be nationalized. That’s right, they are voluntarily asking to be taken over by the Department of the Treasury. This seems worrying, for a number of obvious reasons. If they’re incorporated into the government and that becomes the status quo, there’s a real risk of it turning into a terribly ineffectual Soviet-style SOE (“state-owned enterprise”, a term of art that can best be described as overly optimistic). On the other hand, it should be pretty clear by now that the Obama Administration has little desire to own large parts of the economy, and will be looking to split it and unload it as soon as possible. The main worry is what can be sold, if anything, and whether this proposal will end up taking even a well-intentioned administration by default down the SOE path.
Unlike the banks, the failure of GM could not destroy the economy of the US (though it wouldn’t be pretty), and it just seems like nationalizing industries is so problematic that either systemic risk or pressing national security concerns really ought to be the minimum bar. The fact that GM is asking, rather than resisting, shouldn’t change that basic calculation; they know they can’t survive, and the management thinks that BHO is more likely to let them keep their jobs than their creditors. With good reason, since it’s pretty clear that Uncle Sam sucks at driving hard bargains.