Bush Administration to Use $700B Bank Bailout to Aid American Automakers

In a bid to revive the U.S. government's effort to rescue the American automakers, General Motors (GM) and Chrysler, the Bush administration is considering tapping into the financial bailout funds from going bankrupt. If GM or Chrysler files for bankruptcy, this will further rock the U.S. economy and send it into chaos if plants are shut down, job losses are triggered and delivering yet another shock to the jittery consumers.

The following is extracted from http://www.iht.com/articles/2008/12/12/business/auto.php :

Following the collapse on Thursday evening of efforts to rescue U.S. automakers with congressional legislation, the Bush administration shifted positions on Friday and said that it would dip into the money set aside for the $700 billion financial bailout to keep General Motors and Chrysler from going bankrupt.

"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms," Dana Perino, President George W. Bush's spokeswoman, said in a carefully nuanced statement released minutes before the financial markets opened in New York.

"However, given the current weakened state of the U.S. economy, we will consider other options if necessary - including use of the TARP program - to prevent a collapse of troubled automakers."

The Treasury Department promptly indicated that it would provide short-term relief to the automakers. "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," said a Treasury spokeswoman, Brookly McLaughlin.

TARP is the Troubled Assets Relief Program, the official name of the Treasury's financial rescue program, originally intended to assist banks.

Referring to the carmakers, the White House statement said, "A precipitous collapse of this industry would have a severe impact on our economy. It would be irresponsible to further weaken and destabilize our economy at this time."

The statement indicated that Bush was prepared to capitulate on his objection to using the bank bailout funds to stave off imminent bankruptcy filings at General Motors and Chrysler and possibly Ford in the future.