General Motors and Chrysler submitted “financial viability” plans to the U.S. Treasury on February 17 that included combined requests for another $18.6 billion in federal bailout funds — $16.6 billion for GM and $5 billion for Chrysler.
“President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure,” the Associated Press reported after the president’s February 18 speech in Phoenix, Arizona, where he unveiled his solution to the mortgage crisis. But the “lifeline” Obama threw comes at a cost, since the government does not create wealth (though it does create money via the Federal Reserve), and the $75 billion that will be spent to “rescue” beleaguered homeowners will have to come from the American economy.
Will the banks be nationalized? That question would have seemed preposterous prior to the $700 billion Troubled Asset Relief Program to bailout major financial institutions. But with the TARP money comes federal control, and that control could be strengthened to the point of full-blown nationalization, particularly if the already congressionally authorized $700 billion is deemed insufficient to “rescue” the banks.
Oil prices dropped from $141 per barrel to below $40, but experts say that this decline is going to end in 2009, according to 24/7 Wall Street. When oil prices tumbled, OPEC made an attempt to reduce production, calling on OPEC nations to produce less, but its efforts were largely unsuccessful because, it is speculated, some OPEC nations bucked the cartel and kept production high, maintaining falling prices. About the only thing that kept the prices at U.S. pumps from falling even lower than they did is that some California refineries shut down for routine yearly maintenance.
The federal government handouts to the auto industry continued over the weekend with the announcement of a $4 billion bridge loan to Chrysler LLC to help keep the Big Three automaker afloat. Chrysler, be it duly noted, is 81 percent owned by Cerberus Capital Management LP, one of the world's largest hedge funds, which has been inexplicably unwilling to use any of its own billions to help the troubled automotive giant.
On Monday Apple's stock rose dramatically, gaining 4.22 percent by the end of trading and closing at $94.58. Analysts attribute this dramatic rise to an announcement made today by Steve Jobs, Apple's CEO, regarding his health situation.
The Bush administration and the Federal Reserve announced on November 25 almost $800 billion dollars in additional funds to help, bail out, or otherwise prop up the financial sector, bringing to nearly $7 trillion the total sum that the federal government has thus far spent or pledged to spend in its feckless efforts to spare America's largest corporations from insolvency. Included in the latest package is $200 billion for the purchase of securities backed by many different kinds of loans, including student, credit card, auto, and small business. Such loans have become much harder to obtain in recent months, and the Fed's action is intended to get credit in these areas moving again.
By now everyone knows that Congress and the White House approved an enormous $700-plus billion package a short time ago and that the Treasury Department is rapidly burning through that mountainous sum and asking for more. What wasn't known until the past few days is that the Federal Reserve has been "lending" hundreds of billions of additional dollars to troubled companies and institutions. In fact, the Fed may have already dished out nearly $2 trillion!
The pleading for a financial bailout of the U.S. auto industry is becoming more widespread and insistent. Governors from Michigan, Kentucky, Ohio, Delaware, New York, and South Dakota have added their voices to those of auto executives urging U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to share with automakers some of the $700 billion earmarked for Wall Street. They claim that Detroit's Big Three (General Motors, Ford, and Chrysler) are too big to fail, since one out of every 10 jobs in America depends on the auto industry. In addition to the hundreds of thousands employed directly by the automakers, millions more work in the industries that supply steel, aluminum, copper, plastics, rubber, and electronics to them.
It's no surprise that U.S. automakers are in trouble. Facing massive costs for health insurance, falling demand for mainstay products like trucks and SUVs, and skittish consumers worried about the economy, the Big Three face an uncertain future.