RKMBs Forums .::Important::. Politics and Current Events Democrat Leaders Want Automaker Bailout

TOKYO — General Motors Corp., a struggling U.S. automaker, will sell its entire stake in Suzuki Motor Corp. for $230 million to raise cash, the Japanese company said Monday.

Suzuki said it would buy back a 3.02 percent stake from the American auto giant, which is seeking a $25 billion government lifeline, together with Ford Motor Co. and Chrysler LLC, to weather the deepening economic crisis.

Hit by the worst sales slump in more than 25 years and frozen credit, GM has warned that it might not survive through year's end without the U.S. government's financial support.

Suzuki said GM's stake sale was necessary for the ailing American automaker to raise capital, but the Japanese company insisted it would continue a business partnership with GM.

"We fully understand the necessity for GM to raise cash," Suzuki chairman and chief executive Osamu Suzuki said in a statement. He said he was in close contact with GM chief executive Rick Wagoner, and the two companies would keep joint projects, including the development of hybrid vehicles and a joint venture for sports utility vehicles in Canada.

The GM-Suzuki partnership dates to 1981 but those ties loosened after GM sold a 17 percent stake in Suzuki in 2006, leaving it with 3 percent.

Unless there is a new proposal the money is coming from the original bailout that Bush proposed & passed biparisanly.

Since it's been known to sicken people here at the RKMBs I brought it up purely to inform, because I care

Four insurance companies on Friday moved to buy lenders in order to gain access to money from the Treasury Department’s $700 billion-plus bailout program, in another sign that the insurance industry may be vulnerable in the financial crisis.

Those four insurers -- Hartford Financial Services Group (HIG), Genworth (GNW), Lincoln National (LNC) and Netherlands-based Transamerica parent Aegon (AEG) -- all worked to get their bids in for government help before the Friday application deadline.

Hartford said it has applied to the Office of Thrift Supervision to become a savings and loan holding company, and has applied to participate in Treasury’s Capital Purchase Program. Hartford said it believes it’s eligible for a capital purchase of between $1.1 billion and $3.4 billion under current Treasury guidelines.

In order to make itself eligible for the CPP, Hartford moved to buy for $10 million the parent company of Sanford, Fla.-based Federal Trust Bank, a federally chartered savings bank insured by the Federal Deposit Insurance Corp. Hartford said it would provide an additional amount to recapitalize the bank.

Aegon, which already received EUR3 billion in aid from the Netherlands last month, said it wants to buy Suburban Federal Savings Bank of Crofton, Md., according to a report from Bloomberg News.

Genworth intends to buy Inter Savings Bank of Maple Grove, Minn., a spokesman from the Office of Thrift Supervision told Bloomberg. The OTS spokesman added that Lincoln National, which is based in Philadelphia, is seeking to acquire Newton County Loan & Savings of Goodland, Ind.

Hartford isn’t interested in buying Federal Trust Bank unless the purchase will give it access to government bailout money: its statement said that Hartford’s purchase of FTB “is contingent on Treasury's approval of The Hartford's participation in the CPP, approval of the acquisition by the shareholders of Federal Trust Corporation, and the Office of Thrift Supervision's approval of The Hartford's application to become a savings and loan holding company.”

Hartford took pains to present itself as a healthy and viable company that was simply being prudent amid the financial downturn.

"We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability," Ramani Ayer, Hartford's chairman and chief executive officer, was quoted as saying in the company’s press release. "Securing capital at the terms available through the Capital Purchase Program could be a prudent course in this market environment and would allow us to further supplement our existing capital resources."

Insurers of all stripes have come in for scrutiny after the near-collapse of American International Group (AIG) and as the financial crisis continues.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke waged a stout defense on Capitol Hill Tuesday of their management of a $700 billion financial bailout just one week after the administration abandoned the original strategy behind the rescue.

Focusing the program on infusing billions into banks — and possibly other types of companies — to pump up their capital and bolster lending to customers was deemed a faster and more effective approach to stabilizing the financial system than buying rotten assets from financial institutions, the centerpiece of the original plan, Paulson said.

Buying those toxic debts would have required a "massive commitment" of the bailout money, Paulson said in testimony before the House Financial Services Committee. As economic and financial conditions quickly worsened, it became clear that the first installment of the money — $350 billion — for that purpose "simply isn't enough firepower," he said.

It's crucial that the administration be nimble in assessing changing conditions and adapt the bailout strategy accordingly, the Treasury chief said. "If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract," Paulson said.

Last week, Paulson changed course and said the government would not use any of the $700 billion to buy bad assets from banks. That had been the focus of the plan Paulson and Bernanke originally pitched to lawmakers.

Going forward, the ability of Treasury to use the bailout program for capital injections and to take other steps to stabilize the financial system — including any actions needed to prevent the disorderly failure of a major financial institution — "will be critical for restoring confidence and promoting the return of credit markets to more normal functioning," Bernanke told the panel.

Paulson said the department will focus on rolling out a capital injection program to pour $250 billion into banks in return for partial ownership stakes in them. Treasury on Monday confirmed that it supplied $33.56 billion to 21 banks in a second round of payments. That followed the initial $125 billion allocated to nine of the country's largest banks, and brought the total earmarked payments to $158.56 billion.

Treasury also will search for new ways to boost the availability of auto loans, student loans and credit cards, which have been become harder to get due to the credit crisis.

Specifically, the department along with the Federal Reserve, is exploring using some of the bailout money to bankroll a new loan facility designed to help companies that issue credit cards, make student loans and finance car purchases. Paulson said he expected putting up only a "relatively modest share" of the bailout money for this facility.

Paulson repeated his opposition to using some of the bailout money to provide guarantees for mortgages at risk of falling into foreclosure, another huge source of distress for the economy.

In a break with the administration, Federal Deposit Insurance Corp. Chairman Sheila Bair, also testifying before the panel, pressed anew for using $24 billion of the bailout money to help some American households avoid foreclosure. As foreclosures mount, the government is "clearly falling behind the curve," she said.

So far, the Treasury Department has pledged $250 billion for banks and has agreed to devote $40 billion to troubled insurer American International Group_ its first slice of funds going to a company other than a bank. That leaves just $60 billion available from Congress' first bailout installment of $350 billion.

Paulson said he is not planning to initiate another capital injection program beyond those already announced. Thus he's unlikely to tap the remaining $350 billion before the Bush administration leaves office on Jan. 20. That would mean the incoming administration of President-elect Barack Obama would decide whether and how the money should be spent.

The idea behind the capital injection program is for banks to use the money to rebuild reserves and lend more freely to customers. However, banks do have the leeway to use the money for other things, such as buying other banks, paying dividends to investors or bonuses to executives. That has touched a nerve with some lawmakers.

Locked-up lending is a prime reason why the U.S. is suffering through the worst financial crisis since the 1930s. All the fallout from the housing, credit and financial crises have badly hurt the economy, which is almost certainly in recession, analysts say.

Rep. Barney Frank, D-Mass., chairman of the panel, has been tapped by House Speaker Nancy Pelosi to draft an aid package for Detroit. The auto companies are seeking $25 billion for emergency loans.

Thank you, Federal Government! Your intervention has saved us once again!

Please, MEM, point to anything that the bailout HAS done. Just saying that the economy hasn't collapsed isn't enough since there wasn't 100% agreement from economists that it would.

Has MEM been avoiding replying to this?

There's rarely 100% agreement on anything. Clearly we just have different opinions on that being good enough. For me seeing two parties work together right before an election to get the bailout passed convinces me that it's not as simple of a matter that I think many of you are stuck on.

The bailout was supposed to free up credit so that the average person can get more home loans and such. Experts are saying that that hasn't happened. It seems that the companies getting this money are either hording it or using it to continue buying up other institutions like themselves. Both parties coming together to throw money at the financial industry with very few provisions isn't a good enough outcome for me.