Bridge Loans to auto makers would work

School of Management Dean Louis Lataif, a former Ford executive, says rather than providing bailout financing to auto-parts suppliers it would be better for the entire industry for the government to provide bridge loans to the auto makers themselves.

“The American public is growing increasingly dismayed by ‘bailouts’ and I’m surprised the government continues to trickle out bailout money a few billion at a time.  There is another approach which would seem to make more sense.

“If our government believes that auto jobs and the auto industry are so fundamental to the health of the economy that they should not be allowed to collapse (a position I share), then it should function as a ‘lender of last resort’ and provide bridge loans to the auto companies that will get them through the next 12-18 months.

“The pent-up demand for autos will then be enormous and the companies should be required to first pay back those bridge loans with interest, making the taxpayers whole.  The amount involved might be $150 billion (a huge amount, but small in the context of the $787 billion stimulus for thousands of quewstionable probrams not fundamental to the economy).  That approach would also help preserve the critical auto-supply base.”

Contact Louis Lataif, 617-353-2668, lelataif@bu.edu

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