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December 15th, 2008
11:00 AM ET

Bailout Bulletin: Bush on board

Andrew Torgan
CNN Financial News Producer

President Bush says he may use money from the Treasury’s $700 billion financial system bailout to help Detroit’s automakers avoid bankruptcy, but he would not provide a timeline. In an interview with reporters on Air Force One en route to Afghanistan, Bush said that "an abrupt bankruptcy for the autos could be devastating for the economy." But White House officials say they do not expect an announcement on any funding for the car companies today. A proposed $14 billion bailout for General Motors, Ford and Chrysler remains in limbo after the Senate failed to pass the measure last week.

The auto industry employs workers in all 50 states - including Alaska and Hawaii. More than 2 million jobs - from manufacturing, to parts to auto dealers - depend on carmakers for their pay. Checkout CNNMoney.com’s interactive map to see how many jobs related to the auto industry there are in your state.

Stocks are off to a slow start in this final full week of trading for 2008, reflecting uncertainty over the fate of the auto industry. Wall Street is also watching Washington as the Federal Reserve kicks off a 2-day meeting today. The central bank is widely expected to cut its key short-term interest rate by a half-percentage point to 0.5% on Tuesday as it tries to heal the financial system. If Fed chief Ben Bernanke and company do lower the rate, it will be the 10th cut since September 2007. Rate cuts are supposed to stimulate the economy, but so far there's been no evidence of that happening.

One-time Wall Street titans Goldman Sachs and Morgan Stanley are set to report earnings this week, and analysts continue to slash quarterly estimates for battered duo. Morgan Stanley is expected to post a loss of $351 million on Wednesday, while Goldman is expected to report a loss of $1.45 billion on Tuesday. Both firms have been hit hard by the credit crisis.

Some of the biggest and best-known names in global finance are calculating they may have lost nearly $2 billion in an alleged $50 billion "Ponzi scheme" run by money manager Bernard Madoff that led to his arrest last week. The Royal Bank of Scotland, France's BNP Paribas and Japan's Nomura all say they had some exposure to the alleged fraud.

American homeowners will collectively lose more than $2 trillion in home value by the end of 2008. Real estate Web site Zillow.com calculated that home values have dropped 8.4% year-over-year during the first three quarters of 2008, compared with the same period of 2007. And nearly 12 million Americans are now "underwater" in that they own more on their mortgage balances than their homes are worth, according to Zillow.com.

Crude oil is up $3 to around $49 a barrel. Prices are bouncing back as traders anticipate a large production cut from OPEC on Wednesday and look to the Bush administration’s vow to bailout the auto industry and help preserve a large chunk of the U.S. economy.

And after a streak of 86 consecutive declines came to an end over the weekend, gas prices are back down again. Prices fell 0.3 cents to $1.660 a gallon. According to AAA, the last time the national average price for a gallon of regular unleaded gasoline was near the current price was December 13, 2008, when the national average was $1.660. 2 states have regular unleaded gas prices of $2 and higher. Forty-eight states and the District of Columbia have regular unleaded gas prices below $2. During the 86-day streak that came to and end Saturday, prices decreased by $2.199 - or 57 percent – from the all-time high of $4.114 that AAA reported on July 17, 2008.


Filed under: Andrew Torgan • auto bailout • Bailout Turmoil • Economy • Finance • Gas Prices • Oil
soundoff (4 Responses)
  1. Teresa

    So far it doesn't seem like any of the bailouts have done any good to the economy. Since bailing out those financial firms and insurance firms, we have seen more unemployment, more volatility in the stock market and homes are still being foreclosed. Their scare tactics about how the economy would be destroyed if we don't bailout out Bear-Stearns and AIG have resulted in nothing but more misery for the economy. I think it's time the government learn a different word other than "bailout". Try finding ways to create more jobs for people.

    Why should the taxpayers have to bailout the union workers who make $70/hr, get great pensions and great health care benefits and are now unwilling to take a paycut to help out their employers. I don't make $70/hr, don't have a pension and I have to pay for my own health care costs so how i,s it fair for me to pay taxes to bail out people who make more money than I do?

    December 15, 2008 at 8:15 pm |
  2. earle,florida

    The auto-industry shedding 2 million jobs is incorrect ,an alarmist zealot, shouting from the "Empire State Building " counld't be more wrong. At most were looking at 300-400 thousand maximum job losses. These are privately owned, or publically owned companies who have colluded wih "BIg Oil",(Mobil Exxon, Chevron, Shell,etc.) with absolutely no regard for the average (the bulk of US car buyers) auto purchaser. Need we "cry" when manufacturing jobs were lost to other industries ? Just think most of the thousands upon thousands of the auto-industry retiree's get Approximately $5,000 Dollars/monthly pension checks and work at other jobs still geedily making more money while all the time substantially adding to their Social Security pay-out . Sorry,my calculation for these poor slubs total pension out-lays (Auto/Social Security/etc) is equivalent to approx. $8,000 Dollars/monthly,which grosses out at $96,000.00!!! Now do you feel lucky,...

    December 15, 2008 at 12:03 pm |
  3. Annie Kate

    Gas here in Birmingham is 1.45 a gallon; I don't know why it is so much lower than average but I'm not complaining.

    I wish Bush would either do the bailout or say he isn't instead of stringing everyone along with a "might do it". Even if he decides not to, knowing is better than all the guessing going on. I hope if he does decide to do the bailout that he and Treasury will build in the types of accountability checks and business plans upgrades for innovation that Congress was trying to do – otherwise we may just be throwing more money in a hole.

    Annie Kate
    Birmingham AL

    December 15, 2008 at 11:22 am |
  4. Cindy

    Bush may be a lame duck but it seems he has more sense than some of the nuts in congress! Not giving the big 3 any bailout money and letting them fail will destroy our economy! Anyone with half a brain can see it would send us spiraling into a depression. I hope that Bush can hurry the bailout up and get the money to them before it's too late.

    Cindy...Ga.

    December 15, 2008 at 11:06 am |