At the time the government was making these loans, some people here were predicting we'd recoup that investment... based only on the fact we'd recouped a somewhat similar investment in Chrysler, years ago. But I argued we wouldn't, based simply on the debt/equity ratio involved. If you loan a thousand dollars to a company worth $10,000, you've got a good shot at recovering that money, since a reasonable return on that equity should be able to service the debt. But if you loan the same thousand dollars to a company worth $100, you wind up needing an unrealistically good return on equity to cover that debt. We loaned GM and Chrysler more money than the companies were even worth -- which was doubly troubling in light of the fact that much of the market's perception that the companies had ANY worth was simply based on the assumption that taxpayers would keep them from failing.

I'm not sure anything needed to be done to save that industry -- do we really need domestic car companies? It might have made more sense to use the same billions of dollars to pay to retrain auto workers for jobs in industries where the US might have a more enduring relative advantage over international competitors, and to fill shortages we're experiencing (like in nursing). But even if we were going to commit to preserving a strong US auto industry, I'd have preferred to do it in a way that allowed the diseased corporate cultures at Chrysler and GM to die, and to be repalced by an expanded Ford and new companies committed to a new way of doing things. If we're going to be throwing billions of dollars at the problem either way, better to throw it into innovative startups working on better batteries for hybrids and electric vehicles, and little companies like Tesla Motors that have some potential for creating the products of the future. Give them the money to buy up the more valuable Chrysler and GM assets, out of bankruptcy, and start fresh, rather than throwing good money after bad on derelict old companies.