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More Economic News?.Still Crazy After all These Bailouts

By J. Michael McBride

My apologies to Neil Simon for that title. It is hard to keep up with all the economic news and even harder to put it into some perspective. This is especially true since as to many of these events, no one knows the full story and the story changes as the bailout de jour morphs. Here are some tidbits:

GM Merger with Chrysler is OFF (for now):

“What’s ahead

Lache said Monday that GM, whose cash burn accelerated to $6.9 billion during the third quarter, would be unable to fund its operations past December without a government bailout. That’s assuming that suppliers don’t tighten commercial payment terms.

The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for healthcare obligations for retirees. That’s on top of a previously approved $25 billion government loan package for new technology.

Lache estimated that the government will need to provide GM with $10 billion in loans to keep it going through 2010 and as much as $25 billion to fund its cash burn and recovery.

The 1,900 additional layoffs will come in the first quarter of next year at parts-stamping, engine and transmission factories in North America as GM cuts expenses to deal with a worsening cash crisis.

Spokesman Tony Sapienza said the cuts bring the total announced in the past week to 5,500.

Sapienza would not say which plants would be affected by the new round of layoffs. GM has 26 powertrain and 22 stamping plants in North America.

The layoffs will be indefinite, he said, but there will be no plant closings.

Ongoing concerns

If struggling Delphi can’t find new investors and can’t escape from bankruptcy, it may be forced to sell its assets, and that could cost GM more money, the automaker said in its filing.”

And a link to that story:
http://www.star-telegram.com/arlington_news/story/1030568.html

Credit Card Company Becomes a Bank to get Bailout Money…Now Think About that for a Minute….

Yea, Why do Taxpayers need to Bail out a Credit Card Company???

“American Express, the last big independent credit card company in the United States, said it would transform itself into a bank holding company to strengthen its position in the market turmoil.

U.S. Federal Reserve banking regulators said they approved its application because of the "unusual and exigent circumstances" roiling financial markets and the company's interest in tapping up to $3.8 billion in government money.

As a full-fledged bank, American Express would gain greater access to the Treasury's bailout plan for banks, a move that might allow it to lend more freely and perhaps acquire a larger deposit-taking institution.

And a link:
http://www.iht.com/articles/2008/11/11/business/amex.php

Michael

Full post as published by Texas Lawyer Blog on November 11, 2008 (boomark / email).