"Big 3 Bailout" Latest Economic Crisis as General Motors, Ford, and Chrysler See Sales Plummet

There is growing support among politicians for what is being called the "Big 3 Bailout," a federal stimulus package designed to keep the automobile industry, for decades the cornerstone of the American economy, from slipping into bankruptcy and/or total corporate collapse. Congress passed legislation to appropriate $25 billion to the automakers days before they passed the $700 billion Wall Street bailout. Yet, third-quarter sales losses are forcing General Motors, Ford, and Chrysler to turn to the federal government for money to stay afloat.

Rahm Emanuel told audiences Sunday , November 9, watching both ABC's "This Week with George Stephanopoulos" and CBS' "Face The Nation" that President-Elect Barack Obama's first priority after the inauguration would be to get to work on the economic crisis. Getting a stimulus package through Congress, extending unemployment benefits, and helping states pay for health care costs were at the top of the list, assured Obama's new Chief of Staff. He added that the new President was intent on expanding health care coverage, making education more affordable, and revamping the nation's energy policy - all geared toward reviving the middle class.

And those reassuring words were what a troubled nation needed to hear. Although polls indicate that President-Elect Obama's first press conference was seen by most people as a success, the news of the day that preceded the press conference did little to help inspire and uplift.

Ford was first to report bad news out of Detroit. General Motors then reported substantial third quarter losses. Thousands of layoffs were announced. Both companies' stocks took substantial hits. By Monday, General Motors stock was trading at its lowest in its history. By Tuesday, it had set a new low. An emergency bailout of the auto industry - dubbed the "Big 3 Bailout" -- was called for and is supported by incoming President Obama.

All of the Big 3 automakers -- Ford, General Motors, and Chrysler -- have reported 20% losses for the year. It is believed the final year-end reports will be worse.

The argument in favor of the "Big 3 Bailout" is much the same argument used in bailing out AIG - the ripple effect from the collapse of the automobile industry would be far too great an economic disaster to allow to let happen. General Motors alone employees over 750,000 people. Added to the catastrophe would be insurance policies, pension funds, subsidiary companies and their employees, affiliated companies and their employees.

But that wasn't all. The Department of Labor reported 240,000 jobs lost in October, driving the total number of jobs lost for the year to 1.2 million.

Just the week before, the U. S. saw its 17^th bank failure for the year. Freedom Bank of Florida was taken over by the Federal Direct Insurance Corporation (FDIC).

On Monday, AIG, the financial giant that the government has already loaned $200 million, asked for more. The federal government gave them an additional $27 million, bringing their total bailout/ buyout to $150 billion. The embattled lending giant came under fire for corporate excess on Tuesday for footing the bill for a $150,000 sales conference at a posh Arizona resort last week.

And if all those economic calamities weren't enough, news from Europe and Asia were not promising either. It was announced that the failure of Iceland's bank would cost England $1.3 billion.

On Sunday, China announced that it was going to appropriate $526 billion for a bailout to help their dying economy. China is the world's fourth largest economy. That economy is driven predominantly by exports. Since the world market is depressed, demand for Chinese goods have decreased, placing China in economic straits alongside the rest of the world.

And economists like Nobel Prize-winning economist and author Joseph Stiglitz have warned that it does not look as if the economy will start an upturn anytime soon. In fact, it could be years before the economy registers an upswing.

A Rasmussen Poll released on November 12 shows that while the consumer and investment confidence are at record lows, President-Elect Obama is enjoying higher approval ratings. Overall, 58% of Americans polled approve of President-Elect Obama's handling of the transition to power, 38% disapprove.

And although the new president will inherit a myriad problems upon entering the White House, it is becoming quite evident that the economy will be Priority One and remain so for quite some time.

Sources:

WashingtonPost.com

RasmussenReports.com

ABC Television

CBS Television

VOANews.com

Associated Press