01/19/2009 05:12 am ET Updated May 25, 2011

GM, Chrysler Bailout: How The Feds Will Govern Detroit

The federal government has rescued banks, insured a huge insurance company, and stepped up as a lender of last resort. Now, with its bailout of the auto industry, it's the functional equivalent of a bankruptcy judge, too.

By agreeing to loan General Motors and Chrysler a combined $17.4 billion, the government keeps the two companies on life support during the worst car-industry downturn in decades. But the deal also gives the two companies a tight, three-month window to prove how they'll get competitive, become profitable, and pay back taxpayer largesse.