The Chrysler coporation seeks a more intimate relationship with the federal government. The company's enormous losses -- $205 million last year, $207 million the past three months alone -- raise a real possibility of collapse in the absence of a rescue by the federal treasury. The company suggests $1 billion over two years, advanced in anticipation of tax benefits that it hopes Congress will enact. The tax benefits would recompense Chrysler for the costs of meeting federal pollution and efficiency regulations. These regulations are anticompetive, Chrysler argues, because they are easier for a big company like General Motors to meet than a small company like Chrysler.

But Chrysler, with $16 billion in annual sales, is not a small company, and it is known for its first-rate engineering capacities. Much smaller companies are managing to live with the regulations -- American Motors in this country and Saab, among many others, board. Chrysler simply moved too slowly in developing pollution controls, and failed to anticipate the swing to small cars. Its present crises arises from an inability to make small cars at fast as it could sell them -- and an accumulation of an inordinately expensive inventory of big cars and trucks.

The conventional case for a federal bail-out is to preserve jobs. Chrysler has some 150,000 employees in this country, and perhaps twice as many more jobs are indirectly dependent on it through its suppliers and dealers. But preserving jobs merely to preserve jobs is dangerous. The British economy is the outstanding example of the policy's costs in low productivity and lethargic management.

A bail-out might also be defended as a defense of competition. General Motors already sells six out of every 10 American-built automobilies, and the decline of Chrysler would leave it more heavily dominant than ever within the American industry. But the foreign cars offer a stronger guarantee of future competition than a week domestic company propped up by public subsidies.

On one point, Chrysler is in luck. It brings its troubles to the White House at a moment when the tenant there is confronting both a difficult reelection campaign and a recession. He could use a few friends in the Upper Midwest, and in the labor movement. After a diligent study of the financial accounts, and meditation on the equities, he is likely to support a bail-out -- and Congress, for similar reasons, is likely to agree. The bail-out is bad in principle, but it's probably inevitable.

Stipulating this, how then should the thing be organized, if it must be? The idea of advance payments on future tax breaks seems especially dubious. There are several rules that the administration needs to apply. It ought to follow the 1971 Lockheed precedent in limiting the aid to a short period, to resolve a temporary crisis. It ought to rule out, explicitly, and continuous or repeated subsidies. The aid ought to be designed to help Chrysler meet the federal health and fuel-efficiency standards, rather than to postpone them. For its money, the public is entitled at least to that much.