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March 30th, 2009
01:18 PM ET

Financial Dispatch: White House takes the wheel

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/03/30/obama.autos/art.gm.gi.jpg]

Andrew Torgan
CNN Financial News Producer

The Obama Administration gave General Motors and Chrysler failing grades today for their turnaround efforts and promised a sweeping overhaul of the troubled companies. As part that overhaul, the White House requested - and received - the resignation of GM CEO Rick Wagoner.

Under the new plan, the federal government will provide operating funds for both automakers for several weeks, during which time the companies will have to undergo significant restructuring.

"We cannot, we must not, and we will not let our auto industry simply vanish," Obama said. "This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success."

GM will get 60 days and Chrysler 30 days in which to make a final push toward proving they can run viable businesses. If Chrysler succeeds, it will receive a $6 billion loan. The amount of money GM may receive was not specified.

GM and Chrysler have already been given $17.4 billion, while Ford has not asked for any bailout money.

Be sure to check out CNNMoney.com’s complete coverage of Detroit’s downfall.

Speaking of bailouts, Treasury Secretary Tim Geithner said in an interview Sunday that of the original $700 billion allocated last year to bailout out the nation’s banks, only about 20% of that money remains.

Geithner said the Treasury has about $135 billion left, and while he warned that some institutions will need “substantial” government aid, he declined to say whether he will request any additional funding.

“If we get to that point, we’ll go to Congress and make the strongest case possible and help them understand why this will be cheaper over the long run to move aggressively,” he told ABC News.

Earlier this month, Geithner announced a plan shore up the banking sector with a public-private partnership to finance the purchase of so called “toxic assets” from the banks’ balance sheets.

Stocks on Wall Street tumbled right out of the starting gate as worries about the auto industry and banking system gave investors a reason to keep retreating after the recent rally.

Stocks fell Friday as well, with investors retreating after pushing the major gauges up more than 20% in less than three weeks on some optimism that the economy is closer to stabilizing.

But after that run, stocks were vulnerable to a pullback, and the concerns about the auto and banking sectors provided the catalyst today.

At the “Group of 20” meeting this week, President Obama is expected to push the new regulations that he and Secretary Geithner pitched to Congress last week as a way to prevent another financial market collapse.

Obama heads to London on Tuesday and will meet the next day with the leaders of Great Britain, Russia and China.

He will emphasize the need to regulate hedge funds and derivatives markets, encourage better capitalization of financial companies and "forge coordination among regulators," said one Obama adviser. The need to crack down on offshore tax havens is also on the agenda.

And gas prices rose 3-tenths of a cent overnight to $2.048 a gallon, the 13th consecutive increase.

30 states and the District of Columbia have regular unleaded gas prices of $2 and higher. 20 states have regular unleaded gas prices below $2.

The highest gas prices are in Alaska ($2.477). The cheapest gas prices are in Wyoming ($1.838).

soundoff (15 Responses)
  1. Lash Larue

    Next up Detroit gets the 17 Chinese terrorist,from Gitmo with subsidies from the Tax Payer,to start their new life here. Obama has no common sense,and no one in his administration has ever ran a business or been in charge of one.....Now GM's CEO get 20 million AFter a Bailout,where is the outrage from Obama?

    March 30, 2009 at 6:23 pm |
  2. Teresa

    @ Cindy:

    "OK..why is the White House being so tough on the automakers yet so slack on Wall Street and their bailout? It makes ya wonder huh!? Could it be more back scratching that Obama is doing for the Wall Street types?"

    100% agree with you. I wonder what happened behind doors? Something doesnt make sense with these decisions.

    March 30, 2009 at 6:18 pm |
  3. Mari

    @ Sam Sarullo............... This is not a dictatorship!

    When a company in this case, GM, goes to the government asking for a bail out, and receive it. The government in this case, the president has the right to ask the CEO to resign. Wagoner resigned.

    In free market Capitalism, when you are CEO and your company is FAILING ......... you get fired! Or you are asked to resign.

    Capitalism does not reward failure!

    March 30, 2009 at 5:11 pm |
  4. RLWellman

    I'm a retired GM auto worker and I think this is a bunch of bull. If the President has said Rick Wagoner needs to quit because GM borrowed money from the government, how about all the bailouts? Shouldn't all the Congressmen, Senators, Governors, and Mayors that are requesting bailout money for their state and cities resign too? While we are at it, Pesident Obama should resign because he is accepting bailout money from a communist country to bail him out?

    March 30, 2009 at 5:06 pm |
  5. Paul Ernest Show

    The ripple effect of these two giants collapsing will be humongous and devastating. I will continue to applaud any government, local or federal, for helping companies kerep their doors open for business. We cannot afford to continue to have this massive unemployment all over America. It is a big investment worthwhile.

    March 30, 2009 at 4:45 pm |
  6. Annie Kate

    I'm not surprised the government asked for GM's CEO's resignation. I just wonder who they are going to replace him with – an experienced manager with an automotive background and the ability to turn the company around might be hard to find.

    March 30, 2009 at 3:37 pm |
  7. Philoan Tran - Houston

    Finally the White House is getting tough and asking for CEO's resignation; I hope that Mr. Obama will do the same and calling for resignation of corporate executives and board of directors from the WS banks and AIG which taxpayers are bailing out.

    March 30, 2009 at 3:04 pm |
  8. Clark

    so President Obama has added a non-Constitutional title to his list ... that of Chairman of the Board.

    Well let me say this in response .... as long as the Federal government owns or runs a business that is supposed to be in the private sector I will never buy one of its products.

    March 30, 2009 at 3:01 pm |
  9. Neo

    Since Geithner said the Treasury has about $135 billion left, give it to the education sector. If there is anything we learned today, they need it the most. Give it to those with student loans as well. The money they save will be spent on higher mortgages, which improves their QOL, which puts money right back into wall street better. The ROI would be in raising their taxes. But it would have a better face if they give some of this money directly to the people. btw I don't have student debt. I'm just sensitive to the ones that do.

    March 30, 2009 at 2:58 pm |
  10. Michael "C" Lorton, VA

    GM and Crysler will eventually go under--better now than later--it will cost less to the taxpayers.

    March 30, 2009 at 2:30 pm |
  11. Patti-Michigan

    There are a few hundred thousand retirees.What will happen to us if GM goes into bankruptcy? If we are wiped off the books and thrown into the guaranteed government pension plan(who says they cannot afford us) we will get only half of our retirement I have been told.
    How many more people will then be losing their homes,financed vehicles and defaulting on their credit cards? I know we will.Many will have to get government assistance with housing and food at a high cost to the taxpayer.Most like my parents and inlaws are too old to go out and get a job,of which there wont be any in Michigan that already has sky high unemployment

    March 30, 2009 at 1:58 pm |
  12. Sam Sarullo

    The US Presidency has transitioned from a Military Dictator to an Economic Dictator.

    March 30, 2009 at 1:51 pm |
  13. JC- Los Angeles

    It's stunning to finally hear that our leadership has come to the conclusion that it might be a good idea to require resignation letters from a horrid executives before doling out billions of dollars in taxpayer money.

    The only thing more egregious than Henry Paulson doling out cash without requiring any executive or board to be removed from power was seeing little Timmy Geithner do the same.

    It's one thing for our horrificly bad executives to make a killing running companies into the ground but an entirely different matter for them to retain their jobs while getting billions more in aid.

    Let's hope the White House doesn't stop at just the CEO level and demands all top executives and boards be replaced.

    March 30, 2009 at 1:41 pm |
  14. Cindy

    OK..why is the White House being so tough on the automakers yet so slack on Wall Street and their bailout? It makes ya wonder huh!? Could it be more back scratching that Obama is doing for the Wall Street types?

    Cindy...Ga.

    March 30, 2009 at 1:36 pm |
  15. xtina, chicago IL

    Great. Now the government is guaranteeing auto warranties. Anyone want to bet this is going to be GM's only profit center this yr? Why would GM turn down any claims? More claims, more profit. Just send the bill to Obama- err- Washington.

    March 30, 2009 at 1:36 pm |