The Obama administration recently set off the next stage of the drama involving General Motors and Chrysler. I’m not sure how I feel about this level of government intervention, but I would hate to see an American auto company fail. What do you think is the best path to avoid that fate?

On the one hand, I was pleased to hear of the administration’s dose of “tough love” to the industry. For too long, stakeholders have proposed partial solutions that kick the problem down the road. As a side note, it would be nice if this same tough love was given to the financial sector, in order to avoid using two sets of standards.

On the other hand, I am quite concerned that the administration took it upon itself to fire the CEO of a publicly traded company and move to replace a number of board members. That’s not a defense of the management of General Motors or Chrysler on my part. Quite the contrary. I have long thought that the actions of management and union leadership have been inexcusable. These are very bright people who had to know they were milking the companies dry by making commitments that were unsustainable.

With that said, the government’s actions are reason for concern. My thoughts are not driven by politics, but by the time-tested principles espoused by the Church. In this case, there should be a genuine concern as to whether the government’s actions are veering too far on the spectrum toward socialism, meaning government ownership or administration of the means of production. The Church has rejected socialism as a principle.

Rather than removing the CEO and board members, the administration would have done better to have all stakeholders (including the government, given its bailout interest) agree to a new board and management.

This could probably have been achieved only through the formal bankruptcy reorganization process — which, in my view, has always been the most reasonable path forward anyway.

While it would have been better had the companies entered the bankruptcy-reorganization process earlier, I still believe it is the best option. Otherwise, this messy process will continue to be overly politicized.

Bankruptcy doesn’t mean there is no need for government involvement. It is apparent that substantial funds would be necessary to help General Motors and Chrysler transition out of bankruptcy. While such funds should initially be sought from the private capital markets, it is possible they may not be willing to provide the capital. The government will, in all likelihood, need to step in to provide this financing — which carries its own set of risks.

But, assuming the companies have been forced to develop realistic plans, I consider it a risk worth taking, especially given the number of jobs at stake.

One way to lessen the negative effect of government financing would be to develop a matching process of public and private funds.

By requiring at least a substantive amount of private capital, the risks associated with the government’s involvement can be reduced. Such a solution provides a realistic future for the many thousands of people employed in the auto industry (indirectly as well as directly), while avoiding a substantial shift toward government administration of the means of production.

By the way, the same basic principles that apply to big corporations — and that ought to guide government — also apply to, and should guide, individual families and households.

God love you!

Phil Lenahan is online at

VeritasFinancialMinistries.com.