Railroad Bailout May Offer a Model for Detroit

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As General Motors and Chrysler struggle to remain solvent, the railroad bailout of a generation ago could offer a template to the Obama administration — one in which the federal government would run the auto companies until they are back on their feet, The New York Times’s Louis Uchitelle reported.

That was a different age, of course. Congress was very much on board, supervising the reorganization of the bankrupt Northeastern railroads and then forming Conrail, in 1976, to run them. The auto companies, in contrast, are being pushed by the White House and Congress to reorganize themselves and remain private corporations, owned by shareholders.

Conrail presided over huge cutbacks in rail operations, leaving the railroad system with much less track and roughly half the number of employees. By 1981, it was turning a profit hauling freight, and eventually its operations were sold back to privately operated lines.

Five years after Conrail’s creation, Ronald Reagan became president and gave government takeovers a bad name by popularizing the view that government was inept in the marketplace. The Obama administration, respectful of this continuing view, wants the automakers to stand on their own, with only temporary federal loans to get them through the hard times.

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