>>> "I smell fresh fear/panic today. I am not sure of the source. All of the credit indicators look horrible. There might be another Lehman like blow-up in the works." <<<
One positive - mortgage rates dropped again today.
This should be a chart at bankrate.com
bankrate.com
Enough positive news.
The auto bail out hearings were a major downer, with talk about massive layoff, bankruptcy of supply chains, AND triggering of Credit Default Swaps on GM & Ford causing problems for the financial sector. These hearings went on for hours. It was also mentioned that some potential car buyers were starting to avoid the Big 3 because of potential BK.
Mark Zandi, and economist from Moody's, said expects the auto bailout will require between 75 and 125 Billion. He also said it would be necessary because letting the auto companies fail would be worse.
^^^^^^^^^^^^^^^^
$125 billion to save Detroit?
Mark Zandi, chief economist of Moody's Economy.com, joined the CEOs in urging passage of the loan package. He said the economy is too vulnerable at this moment to weather the damage that would be caused by a failure of one or more of the companies.
But Zandi cautioned that car sales are likely to stay very low due to rising job losses, tight credit as well as an unsustainable level of sales from earlier in the decade. He cautioned that an auto turnaround could eventually cost between $75 billion and $125 billion.
"The automakers have come forth with a reasonable plan to restructure their business, but the $34 billion might not be enough for them to become viable again," he said.
Zandi said he would expect the automakers to be back before Congress late in 2009 for additional money.
But he said that even if the Big Three were to get $125 billion in loans and default on them, that would be cheaper for the federal government than the cost that automaker bankruptcies would cause since a failure could lead to lost tax revenue, increased Medicaid and unemployment payments.
"It's not a close call," he said about the cost of a bankruptcy. "It's not even in the same universe. A bankruptcy at this point in time would cataclysmic for the economy." |
