Can somebody PLEASE explain the automaker bailout to me?

I just don't understand it at all...has this ever happened before where a large corporation asked the government for money?

Update:

Thank You for your answers both were informative.....especially yours teri Thank You!

2 Answers

Relevance
  • 1 decade ago
    Favorite Answer

    Basically, the idea is to give taxpayer money to the auto corporations so they will survive a few months longer, so then Obama and the new Democratic congress will be in power. And then they will go bankrupt under their watch instead of Bush's.

    Sorry for the sarcasm. Basically the government is acting as a lender of last resort. Normally a company would go bankrupt if they run out of money, but because the automakers are so big and employ so many people, a lot of people think they are "too big to fail" because if they did it would cause even more devastation to the economy. But this is debatable.

    So the hope is that Obama and the new Congress can come up with more of a long term plan or bailout for the automakers. If it works and the automakers come back to profitability, taxpayers will get all their money back and even make money out of the deal, just like venture capitalists or stockholders.

    However a lot of people think they will go bankrupt anyways and giving them taxpayer money is throwing good money after bad, and just prolonging the agony and the inevitable.

    We'll see what happens.

    • Login to reply the answers
  • Anonymous
    1 decade ago

    Im not really sure about all the details, but i know it has to do with what kind of economy or government supports. Free market economy is when there is no government intervention and they pretty much let the market work itself out. There is no country that actually uses this type but some tend to lean toward that end. The other end of the spectrum is a command market which is basically fully government controlled, like communism. The reason the great depression went on for so long is because the government did not intervene as much as they should have. But Canada and the US are mixed market economies so the government can still intervene when they feel it is necessary. that's why they are allowed to bail out the automakers.

    Bailing out corporations has probably happened before but i'm not sure when - you would have to research that part. that would be interesting to find out if it actually worked because so many people doubt the automakers will make it even with a bailout.

    • Login to reply the answers
Still have questions? Get your answers by asking now.