A better bailout plan?

YOU HAVE to insert an obligatory guffaw when you read the first sentence written by Eliot Spitzer on the auto bailout: "A crisis is a terrible thing to waste."

But Spitzer, the disgraced former New York governor, who knows a thing or two about crises, goes on to lay out an intriguing idea for how government should respond to the big three automakers and their financial woes.

Writing in the online magazine Slate.com, Spitzer proposes that instead of the bailout plan that had been touted until the Senate killed it last week - bridge loans drawn from a fund designed to research energy-efficient designs, concessions from unions and a "car czar" to oversee it all - that the Big Three companies should compete for a $25 billion pool of capital that only two of them will get.

"The surviving two," he goes on to explain, "will be those that submit the best, and final binding bids, supported by all the necessary constituencies: boards, managers, suppliers, vendors, creditors, and the UAW."

Spitzer's idea is a good reminder that there is no real reason to consider the Big Three as an inviolable unit. Why should we assume that bankruptcy for one means bankruptcy for all? It's not only possible, but likely that one or two of the companies have been better managed and are sounder risks than the others. We simply don't know enough yet about the workings of any of these companies to make that assumption.

What does seem clear is that the way Washington has responded to the major crises of the past few months is rushed, lacks due diligence and is corrupted by politics. In fact, the way Congress has behaved throughout this crisis has been less than impressive. In the financial-industries bailout, it first faltered and then imposed so few controls over the $700 billion that some of the rescue money may be used for bonuses. More recently, their attacks on labor during the auto-industry hearings would have been more appropriate directed at the architects of the financial industry's collapse, instead of assembly-line workers.

The Bush administration will no doubt make some loans available to the carmakers. But there must be a saner way for government to respond to these industry meltdowns. These huge crises demand the magnitude of a big federal government, but rescues will easily be undermined by the smallness of how many in government think. *