Detroit gets in on the action
Source: http://www.econbrowser.com/archives/2008/09/detroit_gets_in.htmlPosted on Tuesday, September 30th, 2008 | In Economics
With all the excitement in financial markets, I almost missed this story on the bailout for automakers.
The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation. The loan guarantees were included in a continuing resolution that included funding for the US government and the wars in Iraq and Afghanistan.
President George W. Bush has indicated that he intends to sign the bill….The bill, which was approved by the House of Representatives on Wednesday, are the first loan guarantees for U.S. carmakers since Congress approved a similar 675 million dollar measure for Chrysler Corp. in 1980. Chrysler Chairman Robert Nardelli, however, said this week the loan guarantees should not be considered a rescue package for struggling carmakers. “This is not a bailout,” he said.
Well, if the loans are repaid, you might argue that it’s not a bailout because no federal outlays were involved. And you might argue the same for the $1.7 trillion in Fannie and Freddie’s debt that the U.S. Treasury now seems to be guaranteeing, and for the $3.1 trillion in guarantees on agency MBS, and for the $600 billion or so in loans that the Federal Reserve seems to have extended. Not to mention the $700 billion Treasury plan still under debate.
Now, there may be a wee bit of a correlation among those sundry and staggeringly large exposures– the state of the world in which the auto loans don’t get repaid is likely the same state of the world in which significant chunks of the other items also turn in to a bill due for Uncle Sam.
On the other hand, what’s another measly $25 billion among friends?
Technorati Tags: macroeconomics,
autos,
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Afghanistan, Chrysler Corp., Congress, Detroit, Economics, Fannie, Federal Reserve System, Freddie, George W Bush, House of Representatives, Iraq, MBS, Robert Nardelli, United States, United States Senate, Us Government, Us Treasury, USD
 About James Hamilton (http://www.econbrowser.com)
James Hamilton received his Ph.D. in Economics from the University of California at Berkeley in 1983. He has been a professor at the University of California, San Diego since 1990 and served as Chair of the Economics Department from 1999 to 2002. He is the author of Time Series Analysis, the leading text on forecasting and statistical analysis of dynamic economic relationships. He has done extensive research on business cycles, monetary policy, and oil shocks, and has been a research adviser and visiting scholar with the Federal Reserve System for 20 years. |
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