What now for the automakers, now that their bridge loan failed in Congress? The Troubled Assets Relief Program -- TARP -- was enacted to save Wall Street but it's already been so twisted out of its original shape by Hank Paulson that a bit more twisting to save the Big Three from bankruptcy, at least over the next few weeks, won't be difficult. The White House was behind the auto rescue, and Bush doesn't want to leave yet another failure on the portico as he leaves. Democrats certainly won't object, and Senate Republicans will growl but so what?

I expect TARP funds to be offered as a bridge loan to Detroit, especially GM and Chrysler, to keep them going until early January. The new Congress convenes January 6, and its first order of business will be to amend TARP and make it official (Bush will be President until January 20, of course, so this will be one of those odd-ball pieces of legislation featuring a new Congress and an old President).

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Throughout its history, America has cycled back and forth between two distinct targets of distrust -- big business (including Wall Street), and government. In periods when big business is most distrusted, Americans seek protection from it, and reluctantly give government authority to expand its scope. When big government is most distrusted, Americans want less of it, and give big business greater leeway.

Exactly where the pendulum of distrust is located at any given time depends partly on the business cycle. When the economy is expanding briskly, distrust of big business is muted and the public fears that government will spoil the party; when the economy is plunging, big business is deemed the culprit and the public looks to government for solutions. The location and direction of the pendulum also depend on headlines documenting self-dealing and corruption -- either among business leaders or, alternatively, government officials.

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The Big Three need a hybrid vehicle, if you will -- a combination of chapter 11 bankruptcy and a bailout. For every taxpayer dollar they receive, the automakers should be required to come up with $2 from their stakeholders (creditors, shareholders, executives, white and blue collar employees), just as stakeholders would have to sacrifice under Chapter 11.

This is the only way GM, Ford, and Chrysler can possibly accumulate enough money to survive and restructure. It's also the way to avoid favoring the Big Three over foreign automakers in the US (if they want to make the same $2 for every $1 sacrifice, they can do so, too.) And it's a way to avoiding the "moral hazard" of every other big company that gets into trouble during this downturn expecting Washington to bail it out as well.

The only reason for taxpayers to put up even one dollar for every two that the automakers put up is the significant social cost that would occur if any one of the Big Three were to rapidly shrink -- including unemployment insurance, increased liabilities for the Pension Benefit Guarantee Corporation, lost tax revenues, and costs associated with large numbers of people suffering losses of wages and employment.

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