Auto Loan Bailout

President Bush announced that the three big auto makers will get the auto loan that they have asked for in order to keep their doors open. Bush said that the government has agreed to assist them because if they don’t they know that there would be tons of auto workers put out of their jobs and the economy cannot take that kind of hit right now.

He said, "In the midst of a financial crisis and the recession, allowing the U.S. auto industry to collapse is not responsible." He said that without the auto loan they would be looking at bankruptcy and liquidations, which they just cannot afford to happen. The auto loan will provide $17.4 billion in short term financing to the big three.

Of that $17.4 billion, $13.4 billion will come from the $700 billion Wall Street rescue program. They will then add another $4 billion onto the auto loan at a later date. However, unlike the banks, the auto loan is giving the auto makers a much shorter period of time to become financially viable. If they have not succeeded by March 31st of next year, then they will be looking at the auto loan coming due.

The government is planning on calling back the auto loan as of that date, and ordering all funds returned to the Treasury. Many say that the auto loan is a necessity, but that asking them to be financially sound by that date is not possible. They say that if this is the government’s plan then they are giving away the money for good, for if they think that there is even a possibility of them not being in that position then they certainly aren’t going to be able to pay back the auto loan.

 



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