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To: TimF who wrote (3025)	12/13/2008 1:05:21 AM
From: c.hinton	Respond to of 3816

GM and Chrysler: White House considers using bank bail-out fund for rescue The White House is considering using money from the $700bn bank bail-out fund to save the ailing American car industry after the US Senate voted down legislation designed to keep Chrysler and GM afloat. By James Quinn, Wall Street Correspondent Last Updated: 7:13PM GMT 12 Dec 2008 President George W. Bush and Treasury Secretary Hank Paulson were contemplating using the Troubled Assets Relief Programme (TARP) despite concerns that doing so will set a precedent for other industries. The policy shift came as the only remaining solution to save General Motors and Chrysler, who have said they need a combined $11bn by the end of the year if they are to avoid Chapter 11 bankruptcy. The prospect came even though the Treasury said on Thursday night that the TARP was just for Wall Street. That decision has had to be swiftly rethought after Republican Senators blocked the auto bail-out bill because of doubt whether the two companies would be able to restructure sufficiently with the funds in the three months to March to be able to survive. "A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilise our economy at this time," White House spokeswoman Dana Perino said on Friday morning. It is understood that President Bush, although originally pleading with the US Congress to use earlier allocated green energy funds to fund the $14bn lifeline for the duo, has now accepted the TARP is the only option. The President's aides are understood to have had a conversation with those of President-elect Barack Obama on the subject in recent days. It remained to be seen however whether the government injection would come before or after GM and Chrysler filed for Chapter 11. Goldman Sachs chief US economist Jan Hatzius said: "The Treasury could either provide only a very short term loan to bridge the companies to early 2009, when a legislative solution appears more likely after the new Congress convenes, or attach terms to any loan (potentially similar to the terms that were rejected last night) which might help to reduce the risk of other potential non-financial borrowers seeking funds." He also said the Treasury could provide debtor-in-possession (DIP) financing to the auto companies after a bankruptcy filing.