Let The Detroit Three Bail Themselves Out---They Created The Mess The're In

Implications: Even with strings attached, any help the Federal Government gives to the Detroit Three, will usher in the most demanding, meddlesome period of U.S. federal involvement in the affairs of Detroit's automotive community in its history 

Analysis: The three big U.S. car makers are angling for government help to the tune of $50 billion. It is understandable: They are struggling, and policy makers have  thrown money at financial sector basket cases before. But Chrysler, Ford Motor and General Motors shouldn't get handouts.

Aside from the cost to taxpayers, a government safety net for companies discourages prudent management. It also potentially puts rivals at a disadvantage, making markets less efficient and ultimately hurting consumers. That doesn't mean policy makers should never, ever step in. But the test should be whether the alternative is disastrous enough to warrant intervention.

Take the blank check Congress recently wrote to backstop mortgage giants Freddie Mac and Fannie Mae. It is disheartening to see tax payers money put at risk. But the alternative was a near-seizure of the already beleaguered U.S. mortgage market- a horrendous outcome for millions of American homeowners.

As for GM and its rivals, Congress in last year's energy bill paved the way for $25 billion in cheap loans for developing and making fuel-efficient vehicles. There is an argument that this balances research and other spending by foreign governments whose costs would otherwise fall on Detroit's rivals. But with the Detroit Three short of cash, it is hard not to see it partly as a bailout. In any event the U.S. car makers now are hoping for more, perhaps with fewer strings attached.

It is true they are big employers. But foreign manufacturers such as Toyota also have tens of thousands of employees in the U.S. Financial support for the U.S. companies would undermine longstanding American criticism of countries that subsidize "national champions." It would also set a precedent for other industries' to raid taxpayers wallets.

Moreover, the U.S. auto companies problems are l;largely of their own making. They didn't invest enough in smaller, more fuel-efficient vehicles when they could have. Now that higher energy costs have finally caught up with them, it is unconvincing to say the government should help them meet  the tougher fuel-economy regulations they have long opposed.

On a historical note, even the Carter administration's bailout of Chrysler beginning in 1979-viewed by many as a success-bought only limited breathing space. The company was eventually sold to Daimler, in 1998, and, after costing the German company billions of dollars, then to investors including private-equity outfit Cerberus Capital management, last year.

In this election year, the Detroit car makers might get lucky. The possibility seems more characteristically French than American. The French, however, might force the three to merge, force out two sets of executives and pay the remaining group a lot less. That isn't quite what Detroit's bosses have in mind.