Auto industry seeks another bailout, this time for bad loans

Earlier today, Doug McIntyre wrote about the Congressional passage and presidential approval of $25 billion in loans to help the American auto industry modernize its plants.

And the pigs still won't leave the trough. The Wall Street Journal reports (subscription required) that the $700 billion bailout plan rejected by Congress on Monday also included a provision to help the auto industry recover from the bad car loans it made, similar to what the housing industry faces. According to the Journal, "A Washington bailout of bad car loans could loosen the flow of financing for potential car buyers and spark demand for new cars and trucks. It likely would free up funds that could be invested in securities backed by auto loans, bringing down borrowing costs for auto lenders."

If the housing bailout is nuts, a bailout to make it easier for people to get car loans is insane. Nearly every finance expert would agree that car loans are something to be avoided, and most people should be buying used cars unless they can afford to pay cash for a new one. The government should not commit taxpayer funding to make it easier for people to overextend themselves buying depreciating assets to impress their friends.

Of course, with the rust belt set to be a major battleground for the upcoming elections, few politicians will have the gall to stand up to special interest groups seeking cash for things that don't benefit the vast majority of Americans -- yet another reason to delay a massive bailout until mid-November, after the election.

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