Tuesday, November 11, 2008

Bailout Attention Turns From Financial Sector

Democrats Press for Car Industry Rescue, Financial Times
Obama Asks Bush to Provide Help for Automakers, New York Times

For a number of weeks, the focus of the United States government's response to the global credit crisis and the accompanying economic troubles has been on the struggling financial sector, from insurance giant AIG to major mortgage providers Fannie Mae and Freddie Mac. Since last week's election, however, significant attention has begun to be paid to a possible extension of federal bailout dollars to the struggling United States automotive industry.

President-elect Barack Obama and congressional leaders Nancy Pelosi and Harry Reid have now called on President Bush and Treasury Secretary Henry Paulson to provide a portion of the $700 billion bailout package, originally intended only for use in the financial services industry, to U.S. automakers, which are experiencing their worst performance in decades. Democratic Party leaders are calling for a three-pronged approach to assisting the auto industry, including: 1)expedited payment of already-appropriated funds for the development of energy efficient cars, 2) allowing the financing divisions of automakers to participate in the capital repurchase program instituted by the bailout legislation, and 3) direct loans of Federal dollars to the industry.

While the President-elect and congressional Democrats acknowledge that these proposals, particularly the direct loans to the manufacturers, will be met with great controversy and opposition, they maintain that the auto industry is so vital to the American manufacturing community and employs such a significant number of people, that the extension of Federal government assistance is warranted.

Discussion Questions
1)Should bailout funds be made available to the United States auto industry?
2)If needed or suggested, should other industries or companies outside of the financial services industry be allowed to receive bailout funds?

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