Originally Posted by
Roody
1. The auto companies always have to be highly leveraged yo make a profit. That means they either make a lot of money or lose a lot of money. Usually they borrow more during a recession. But this recession is also a credit crunch, so they can't borrow money. The government is the only one who has the money they need to keep operating.
2. I think we better give it to them, or we're going to start a depression that won't stop for a very long time. Of course we need to put some very strict restrictions and concessions on the loans, so we don't have a repeat of the bailout debacle with AIG and the other finance companies.
1. Some people suggest that the credit crunch should be what is fixed initially and then the Big 3 can once again borrow from them. In case y'all didn't know how bad the credit crunch is, the banks are no longer loaning to each other, hence the lowering of the Fed Funds rate which is essentially the rate for overnight lending between member (=all) banks. I wasn't truly aware for a while as well.
2. I do not fear a recession. Ben Bernanke is a great student of the depression, whether you like him or not. Volcker is balls-to-the-wall do whatever it takes, even at our expense, to prevent recession (at least these are my impressions). I would hope a auto industry bailout would be better; in this case, it would likely be an injection of cash whereas with the financials, it was a purchase of bad assets such as subprime mortgage packages. Do note that those of you that are considered subprime, you essentially mortgaged yourself now, kind of hurts the head like time-travel....
P.S. - thanks for the PM Roody.