As your constituent, I am writing to ask you not to bailout auto-companies, or in any way pick winners and losers in a competitive market.
The auto companies that are asking for money are not the same as the financial institutions. If Citigroup or AIG declares bankruptcy, other banks and insurers would also fail because any assets they had with the bankrupt institutions would become uncollectible.
If an auto-maker, no matter how large, declares bankruptcy, other auto-makers benefit from the reduction in competition, and the reduction in the supply of product. Prices go up, and the other companies get stronger.
American auto-makers have been struggling for years. Probably the best thing for them is a chapter 11 reorganization. Bankruptcy exists to protect failed companies from creditors. In chapter 11, under court supervision, our struggling auto-makers could get their house in order.
If you have to bail out someone, please bail out the retirees who will suffer most from bankruptcy. And provide retraining and unemployment assistance to laid-off auto-workers. Don’t try and prop the industry up. Instead, help pick up the pieces after it crashes down.
A number of institutions will fail in this economic downturn. The government can not, and should not, try and save them all.