Congress should approve a bailout of the U.S. auto industry because the “collateral damage” of their failure would be “very severe,” says Nouriel Roubini, economics professor at NYU Stern School and chairman of RGE Monitor.
“We’re spending $2 trillion to bail out financial institutions,” the economist notes. “What’s the fairness of not giving say $50 billion of low interest loans to automakers to help them restructure?
But Roubini is no ally of the auto industry CEOs currently making their case in Congress. He says any government aid must be “highly conditional” and only occur after a prepackaged bankruptcy that includes:
- Replacement of current management
- Concessions from both the UAW and automakers
- A wipeout of existing equity and debt-holders
- Temporary nationalization of the auto industry
The appointment of a “car czar” is clearly a touch subject but Roubini says those worried about moral hazard and issues like free enterprise are fighting the last war.
“There’s already massive amounts of government intervention in the economy, we’ve [crossed] that bridge,” he says. “The question now is, what are we doing to do right? If it takes an auto czar to really structure these firms, so be it.”