Should the US Government Bailout Heritage Companies?

As the US financial crisis grows inevitably deeper, should the US Government bail out “heritage companies” via the American taxpayer’s money?


By: Ringo Bones


America’s “big three” automakers, namely: GM, Chrysler, and Ford had been in the headlines lately but not for the good reasons. The US top three automakers had been hard hit by the ongoing economic crisis, which if left alone the three leading car manufacturers would go bankrupt. But the question now is, should the US Government do what it can to save heritage companies – which America’s three leading carmakers surely does qualify as such – even to the extent of using the taxpayer’s money?

Throughout the developed world, heritage companies had always been perceived as an integral part of the country that they originate. The German government even legislated laws that only allow overseas Sovereign Wealth Funds extremely limited investments in their own heritage companies despite howls of protectionism accusations.

Ever since the global financial crisis became too big to ignore, the US Government acted upon several schemes to save ailing companies, which are perceived as heritage companies by many. Like the two leading equity loan providers of America: Fannie Mae and Freddie Mac, which if allowed to go bankrupt could make millions of American families homeless. Thus qualifying them as the most indispensable of the American heritage companies.

Though cars can be considered a luxury when compared to a secure roof over your head, America’s “top three” automakers are thus nevertheless very important heritage companies. Due to their historical significance and they also employ thousands of workers across the country. America would never be the same without them. But should the US Government save them? After all President-elect Obama’s economic recovery plan has a heavy emphasis on fiscal discipline.

To me at least, a financial bailout by the US Government on ailing heritage companies do make fiscal sense. And since the breakdown of the preexisting American free market capitalism is due to too much laissez-faire when it comes to government regulation. The switch over to state capitalism would be smoother and could serve as one of the conditions of a government funded bailout package. Which would make the economic recovery process more efficient since the companies can now be tailored to be in sync with the government’s economic recovery process.