General Motors’ revival under federally financed and controlled restructuring has been surprisingly successful. GM is still employing a lot of Americans, and it is building some models that are apparently good enough to hold their own in an ultra-competitive global car market. What’s more, GM’s rebirth was managed without dumping tens of billions in GM pension obligations on the taxpayers. Why it’s even likely that Uncle Sam will get back a significant chunk of its investment.

Those accomplishments are celebrated in the new book Overhaul by the “car czar,” investment banker Steven Rattner. After all, the failure of this intervention, widely predicted by those who watched GM sleepwalk through much of the last four decades, was supposed to illustrate all that is wrong with liberal policies that just can’t leave free markets well enough alone.

But in the latest issue of The New Yorker, Malcolm Gladwell takes a closer, more skeptical look at the celebration of the bailout. Rattner’s inside story, he suggests, inadvertently illustrates the yawning gap between Wall Street and Main Street, between financial capitalism and the business of making things. And it ought to add to doubts about the benefits of the government takeover of a huge, long-ailing private enterprise.

Wall Street is about transactions — facilitating asset exchanges, making markets, restructuring risk – and typically, in this fee-based biz, the faster the better. And, contrary to popular opinion (post-2008, anyway), modern financial markets can and often do generate beaucoup value. Indeed, without financial innovation, the cost of capital for all but blue chip companies would have been much higher in the post-war years and most of us would be a lot less productive. But the investment bankers’ modus operandi doesn’t always play well in the world where engineering and marketing take precedence. Gladwell captures the clash of these two cultures in Rattner’s decision to replace GM’s CEO (and veteran car guy), Rick Wagoner, after a single meeting and replace him with a telecom executive who knew about as much about the auto industry as we do.

Would Wagoner have eventually been pushed into a conventional Chapter 11 bankruptcy? Probably, though it is hard to blame him for most of what went wrong at GM. But the change in management would have reflected the perceived interests of the stakeholders, not the snap judgment of an investment banker operating on behalf of the government on a schedule partly determined by politics.

OK; there were plausible reasons in this case to vest Rattner with a lot of power. Among others, a truly ponderous restructuring of GM that required near-consensus among stockholders, creditors, unions and government bean-counters might have driven away enough customers to force the liquidation of this icon of American manufacturing. And while GM’s failure wouldn’t have created the sort of systematic risk that the failure of, say, a Citicorp or a Goldman might have, the psychological blow would have been pretty scary in the midst of the worst recession since 1937.

So, where are we left with all this? We’re not Grinches: after the fact, it’s nice to see that GM is still in business. But GM’s rise from the ashes is a problematic model for how the roll-up-your-sleeves-and-plunge culture of investment banking can put the juice back in the real economy. Nor should the apparent success of this intervention serve as a precedent in an economy that still needs to accept an occasional high-profile business failure to distinguish it from the Big Brother capitalism of a Japan or a South Korea.

(This post was also published on Forbes.com.)

The explanation, offered by James Surowiecki in the New Yorker, is right on the mark: In the American political system, a highly focused, well-funded lobby with tight connections in every House district is almost unbeatable when it chooses to play rough. And since this particular political game is over, we won’t rehash arguments about whether the proposed curbs on their behavior would have made sense. But their surprising (to some) escape from federal oversight does offer a nice excuse to remind readers that auto dealers aren’t always against regulation. Indeed, it is hard to think of an industry that depends so heavily on government protection from the cruel realities of the free market for their daily bread, not to mention their vacation homes in Florida.

The protection in question is auto dealer franchising laws, which vary a bit from state to state, but are generally the very model of what government ought not to do. Starting in the 1930s, car dealers organized to get Congress to, in effect, set minimum standards of treatment in their franchise agreements. As Jessica Higashiyama, who recently received her JD from UC San Francisco’s Hastings Law School, recounts, Congress was happy to oblige, but the federal courts were less receptive to the idea that Detroit had duties to franchisees beyond those spelled out in the contracts that both parties had voluntarily signed. So the dealers turned to state legislatures and managed to get some remarkable deals from many of them.

Pretty much all the auto franchise laws give dealers immense bargaining power in obtaining compensation if a car maker chooses to stop selling a model line (think Pontiac) or to stop selling cars entirely though a particular dealer. Indeed, GM and Chrysler had to back away from tough dealer-streamlining plans in bankruptcy because the process was too expensive. Some states make it illegal to sell cars at lower prices to high-volume dealers than to low-volume franchisees. Some prohibit car companies from selling directly to the public (say, via the Internet) because it would adversely affect the competitive position of the dealers. And a number are even considering laws requiring the automakers to compensate dealers for warranty repairs at the dealers’ bloated retail repair rates.

Is there ever a good economic case to be made for government intervention in a franchise relationship beyond the protections afforded by contract, fraud and antitrust laws? Consider it a challenge, dear readers, to think of one. What we are pretty sure of, though, is that car dealers’ friends in state legislatures won’t be waiting around for the law-and-economics types to debate the matter.