"The more the government steps in, the more there are people who want the government to step in," says Peter J. Wallison, a research fellow at the American Enterprise Institute and a former White House and Treasury Department official. "Every time you do it, that creates an equitable argument for someone else to get bailed out."
The president and Congress will also have to decide what sort of concessions to demand from recipients of public largess. For example, only days after the Treasury Department announced the Fannie Mae and Freddie Mac bailout this month, several Senate Democrats proposed that the mortgage companies freeze foreclosures for at least 90 days.
A loan guarantee package for the auto industry is likely to be one of the most closely watched measures in Congress this year. U.S. automakers contend that financial help is warranted because the cost of redesigning their products to meet federally mandated mileage standards by a 2020 deadline will be staggering.
That could provide a template for a similar appeal from airlines, which could argue that the costs of fuel and security measures are hobbling them.
Without more open rules governing the decision-making process, the entities with the most potent lobbyists may get bailouts, putting competitors at a disadvantage.
"We don't have any rules about whether the government should get involved or not," says Cheryl Block, a law professor at Washington University in St. Louis who has followed the bailout issue since the 1990s. "Certain things happen in the middle of the night, and no one knows who's in the meeting."
For now, the decisions seem to be based on a sense that an entity is "too big to fail."
Such concerns drove the bailout of Fannie Mae and Freddie Mac, which together back half of all U.S. residential mortgages. Their failure, government officials feared, could choke off the supply of mortgage credit or drive up mortgage interest rates to levels that would impede recovery for the country's beleaguered housing market.
"Fannie and Freddie define what's 'too big to fail,' " says Jared Bernstein, an economist at the Economic Policy Institute.
A similar case could be made for a company such as General Motors Corp. More than 250,000 workers and roughly 500,000 retirees worldwide are dependent to some degree on the survival of GM; a bankruptcy filing would throw many workers on the street and could deprive thousands of families of health coverage. It also could further strain the federal Pension Benefit Guaranty Corp., which insures retirement benefits and already has a $13-billion deficit.
