Changes

==Auto stimulus==

==Auto stimulus==

In 2008 a series of damaging blows drove the "Big Three" (GM, Ford and Chrysler) to the verge of bankruptcy. Part of the cause was very high labor costs (much higher than the foreign plants in the U.S.), and lack of consumer demand for thier products. The Big Three had in recent years stressed expensive, fuel-guzzling SUVs and large pickups. They were much more profitable than smaller, fuel-efficient cars. When gasoline prices shot past $4 in 2008, Americans stopped buying the big cars, and the Big Three saw their sales plummet.  The Financial Crisis played a role as no one was willing to loan GM the money to buy Chrysler. Consumer credit has tightened and it became much harder for people with average or poor credit to obtain a bank loan to buy a car, so sales fell further.  Stock prices plummeted as shareholders worried about bankruptcy; GM's shares fell to 1946 levels. Intense debate ensued about a massive bailout, that would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency. President Bush proposed changing the terms of that loan so it could be used to cover daily operating expenses, but Congress rejected that. Republicans in Congress in mid-November blocked Democratic proposals to underwrite a new bailout of the auto industry, as industry leaders made an unconvincing case before Congress.  President Obama and Democrats in Congress have demanded the Big Three come up with a highly specific plan with some chance of long-term viability. Critics claimed the proposals would lead to unnecessary job loss.

In 2008 a series of damaging blows drove the "Big Three" (GM, Ford and Chrysler) to the verge of bankruptcy. Part of the cause was very high labor costs (much higher than the foreign plants in the U.S.), and lack of consumer demand for their products. The Big Three had in recent years stressed expensive, fuel-guzzling SUVs and large pickups. They were much more profitable than smaller, fuel-efficient cars. When gasoline prices shot past $4 in 2008, Americans stopped buying the big cars, and the Big Three saw their sales plummet.  The Financial Crisis played a role as no one was willing to loan GM the money to buy Chrysler. Consumer credit has tightened and it became much harder for people with average or poor credit to obtain a bank loan to buy a car, so sales fell further.  Stock prices plummeted as shareholders worried about bankruptcy; GM's shares fell to 1946 levels. Intense debate ensued about a massive bailout, that would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency. President Bush proposed changing the terms of that loan so it could be used to cover daily operating expenses, but Congress rejected that. Republicans in Congress in mid-November blocked Democratic proposals to underwrite a new bailout of the auto industry, as industry leaders made an unconvincing case before Congress.  President Obama and Democrats in Congress have demanded the Big Three come up with a highly specific plan with some chance of long-term viability. Critics claimed the proposals would lead to unnecessary job loss.

In addition to the Big Three hundreds of large suppliers of parts are in financial crisis as well; most would go under if the Big Three go bankrupt.

In addition to the Big Three hundreds of large suppliers of parts are in financial crisis as well; most would go under if the Big Three go bankrupt.

Intense debate in December 2008 focused on allowing bankruptcy or injecting billions more of federal aid; it would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency.  The Democrats in Congress supported president Bush's proposal to use the fuel-efficiency loans to help with the immediate problem. It passed the House but Senate Republicans brioke with Bush and it failed.  The opponents called for a bankruptcy that would allow GM to get out of its contracts to pay union members high wages, as well as generous pensions and medical benefits to retired workers.  Bush then acted unilaterally and decided to make TARP loans to  GM and Chrysler, on December 19. GM and Chrysler will get $13.4 billions in loans they can use to pay their suppliers.<ref> GM and Chrysler will receive $4 billion each when they sign the loan agreements with the Treasury. GM will have access to an addition $5.4 billion on Jan. 16 and another $4 billion on Feb. 17 provided that Congress has released the remaining $350 billion for the Treasury’s TARP rescue program. </ref> GM can receive another $4 billion in February, but by then the Obama administration will be in charge, and it is emphasizing the need for a long-range solution.<ref>David E. Sanger, David M. Herszenhorn and Bill Vlasic, “Bush Aids Detroit, but Hard Choices Wait for Obama,” [http://www.nytimes.com/2008/12/20/business/20auto.html?hp ''NewYork Times'' Dec. 19, 2008]</ref>  

Intense debate in December 2008 focused on allowing bankruptcy or injecting billions more of federal aid; it would be in addition to a $25 billion loan Congress passed in September 2008 to assist in increasing fuel efficiency.  The Democrats in Congress supported president Bush's proposal to use the fuel-efficiency loans to help with the immediate problem. It passed the House but Senate Republicans broke with Bush and it failed.  The opponents called for a bankruptcy that would allow GM to get out of its contracts to pay union members high wages, as well as generous pensions and medical benefits to retired workers.  Bush then acted unilaterally and decided to make TARP loans to  GM and Chrysler, on December 19. GM and Chrysler will get $13.4 billions in loans they can use to pay their suppliers.<ref> GM and Chrysler will receive $4 billion each when they sign the loan agreements with the Treasury. GM will have access to an addition $5.4 billion on Jan. 16 and another $4 billion on Feb. 17 provided that Congress has released the remaining $350 billion for the Treasury’s TARP rescue program. </ref> GM can receive another $4 billion in February, but by then the Obama administration will be in charge, and it is emphasizing the need for a long-range solution.<ref>David E. Sanger, David M. Herszenhorn and Bill Vlasic, “Bush Aids Detroit, but Hard Choices Wait for Obama,” [http://www.nytimes.com/2008/12/20/business/20auto.html?hp ''New York Times'' Dec. 19, 2008]</ref>  

===Bankruptcy scenario===

===Bankruptcy scenario===