Deal me out

Virginia seems to have found an innovative way to latch on to some more bailout money for its citizens:

The Virginia General Assembly is well known nationwide for how badly they can mess things up and make themselves public laughingstocks (abuser fees, anyone?).  Well, it appears they are at it again- on an even bigger scale- this time jeopardizing the entire $25,000,000,000 (BILLION) national auto bailout.

SB1410 doesn't look that harmful on its face.  But dive into the bill, and you will be shocked at what one "Republican" is proposing to do to the free market.  Basically, the bill requires that if an auto manufacturer decides to stop producing a line of cars, they are required to buy back all of the unsold inventory that dealers have.  This bill eliminates all risk for auto dealers- and puts the entire risk on the manufacturers.  Why would anyone want to make any business totally risk free?  This makes no sense.

So, why introduce this bill now in 2009?  That answer is easy.  Car makers just received $25,000,000,000 (BILLION) in cash from the federal government.  The point of this cash outlay was to give them time to reorganize without declaring bankruptcy (i.e. possibly eliminate some lines of under-performing brands).  So this bill is basically a money transfer from the auto makers to the auto dealers should a line of cars be done away with.  If every state did this, the entire federal auto bailout would go to car dealerships instead of the manufacturers!!
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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