General Motors Bankruptcy

[Malacasta]

I am not a subscriber to WSJ online, so I couldn’t read your link.

A google news search on 'Geithner TARP' threw out a lot of articles and many of those suggest that Geithner needs to be clear and reasonable about repayment terms which would indicate that currently, it’s all a bit messy.
This article mentions that JP Morgan, Goldman Sachs and Morgan Stanley have all applied to repay TARP but that “The banks must prove that they have enough capital to keep lending. Regulators will also consider the question of whether the financial system as a whole can supply the credit needed to ensure an economic recovery.”. Which is, perhaps, similar to what the WSJ online might have discussed.

In all honesty, Kailen, I don’t know what to make of it. Even if I were an economist I would probably be confused, I haven’t seen any consensus from that sector about how best to deal with this GFC. From the articles I’ve read on Geithner, I haven’t seen anything that would suggest that this administration wants to completely nationalize the banking sector, I can’t even see from these articles, any suggestion that Geithner wants to hold onto the bank stocks for any longer than he feels is necessary to keep the markets improving or stabilizing. You disagree, but only time will tell.

The American Prospect has this to say about Socialism and AIG and GM. I’ve quoted it in full because I believe it speaks to what Kailen is asserting.

ON SOCIALISM.
Jon Henke highlights a few people wondering” why everybody is afraid to use the S-word" to describe the government's investment in General Motors. The easy joke is, doye, Saul Anuzis already decided that socialism was played and conservatives have to call Obama’s policies "fascist."
But Henke doesn't roll that way, so here's a real answer. It's fair to call the General Motors deal or the AIG takeover examples of socialist policy; government is directly intervening in a private concern. But it's not fair to say that the Obama administration is socialist per se because socialism is an -ism, a system, a guiding philosophy, and it's clear that putting the government in charge of private production is not the Obama administration's guiding philosophy. When some conservatives try to insist otherwise, that's when they look over the top. Maybe there's a point when these socialist policies add up to actual socialism (or in the banking system, lemon socialism) but we are far, far from it.

If the Obama administration had come into office without an economic emergency, they wouldn't be involved in these firms -- don't forget that the first big government takeovers came under George W. Bush and that the management and directors of the auto companies asked for government help. The current administration has made clear they don't intend to be in the auto making (or banking) business for very long, and voluntarily laid out various guidelines to keep politics out of business decisions. Obviously, lines will be fudged and there are plenty of opportunities for conflict, but this is clearly not an administration whose every answer is "seize the means of production" -- see, for instance, this graph, or the administration's deep reluctance to take over insolvent banks despite a fairly large constituency for such an action. Ultimately, then, I'm not sure it's productive for conservatives to call the administration's response to the auto makers "socialism" -- although, hey, maybe some political points in that -- but rather to harp on the fact that the government has made a pretty unfortunate investment because it thought the collapse of the industry presented a systemic risk to the economy.

More broadly, though, as Henke recognizes, one of the reasons the "s-word" has become somewhat meaningless is that it is used by some conservatives to describe things that just aren't socialism at all, like regulations or the income tax, rather than recognizing our hybrid economic system and debating within its framework. We can argue over whether more or less regulation is a good thing and what the appropriate income tax rates ought to be, but neither one represents a socialist policy. Another reason that this socialism debate hasn't taken off is that liberals aren't really in the business of defending socialism, so my response, at least, to the socialism debate is generally, "yup, that's not a normatively good idea, but strategy demands it." I would really have preferred to avoid a government takeover General Motors, but the consequences of not doing so seem catastrophic.