Is a federal government rescue of General Motors do or die for the
Guerrera appeared on CNBC’s Nov. 10 “Power Lunch” to weigh the pros and cons of the newly revised AIG (NYSE:AIG) rescue package. He was asked if this type of government intervention should be offered for General Motors (NYSE:GM).
“That’s what they say,” Guerrera said. “I’m not sure I buy that. I think there’ll be a lot of job losses if GM fails, but there’s nothing systemic in the sense that if AIG goes or if, you know, one of the other banks goes – there’ll be a ripple effect throughout not just the
Pelosi and Reid, in a letter dated Nov. 8, urged Treasury Secretary Henry Paulson to intervene and rescue the ailing auto giant – part of which meant to aid in “the creation of green jobs for the future.”
“Were you to determine that the automobile industry is eligible for assistance under EESA, we would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximize the potential for the industry’s recovery,” Pelosi and Reid wrote. “An automobile industry that is forward-looking and focused on ingenuity, competitiveness, and the creation of green jobs for the future is essential to its long-term viability.”
One of the arguments made by legislators, as CNBC’s Michelle Caruso-Cabrera pointed out to Guerrera, is that the lending arms of the automakers, including GMAC and Ford Consumer Credit, pose “systemic risk” to the global economy. She also cited the fallout from the failure of Lehman Brothers earlier this year and its effect on the credit markets. Guerrera explained bailing out GM would not be the same thing.
“I think they’re less interconnected than Lehman in terms of their exposure to parts of the credit markets that froze when Lehman went,” Guerrera said. “And, I think that those arguments are valid. I just think that they’re less clear cut than you would have them for an AIG.”