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Thursday, 18 December 2008 17:00

Pres. Bush Authorizes TARP Loans For Detroit Three

The White House announced Dec. 19 that it would extend $13.4 billion in loans from the Troubled Assets Relief Program to the Detroit Three auto makers, with another $4 billion likely available in February, citing the need to avoid "disorderly liquidation" during an already troubled economic period. The loans will be allocated from the $350 billion TARP being managed by the U.S. Treasury Department, subject to approval of bank capital applications.

The deal could help GM and Chrysler avoid imminent bankruptcy. The administration said the funds are contingent on the companies showing they're financially viable and competitive by the end of March, otherwise they must pay back the loans in full.


President Bush said that under normal circumstances, he would let the free market decide the fate of the automakers. But "given the current state of automakers and the economy, a bankruptcy would not work best at this time. ... Consumers won't buy cars from bankrupt automakers [because] of warranty values," Bush said. Allowing the automakers "to collapse now would not be the responsible way to go," and could lead to chaotic bankruptcies that would be "painful to workers far beyond the automakers," he said. The government instead must "safeguard the broader health of the economy," Bush said.

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