Monday 22nd December 2008
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GM and Chrysler get US$13.4 billion immediately and a further US$4 billion in February, provided they come up with a restructuring plan and the Congress agrees to release the second half of its US$700 billion Troubled Asset Relief, or TARP, package.
"Government has a responsibility to safeguard the broader health and stability of our economy," Bush said in a radio address.
GM had said it was in danger of running out of cash by the end of the year and the bailout helps avert a collapse in the auto industry that Bush has said risked driving the world's biggest economy into a deeper recession.
The aid package was followed by some US$3.3 billion in government loans from Canada and the province of Ontario, with the possibility of further funds.
Rick Wagoner, GM's chief executive, said he will now focus on rapidly imposing a restructuring proposal.
Shares of GM were the biggest gainers in the Dow Jones Industrial Average on Friday, rising 23% to US$4.49. The stock has dropped 70% in the past six months.
President-elect Barack Obama said the bailout was a "necessary step" though the plan leaves him with flexibility over the details. The White House had estimated the failure of the US auto industry could put 1.1 million Americans out of work, and generate US$13 billion in unemployment claims.
The Dow ended Friday's session down 25.88, or 0.3% to 8579.11, with Citigroup falling 5.5% to US$7.02 after Standard & Poor's lowered the credit rating on the lender and 10 other global banks. Energy shares also weighed on the Dow, with Chevron down about 3% to US$70.85 and Exxon Mobile sliding 2.6% to US$75.02 as the price of crude oil tumbled.
Crude oil fell 6.5% to US$33.87 a barrel on the New York Mercantile Exchange on Friday. Oil fell amid concern demand for fuel won't revive in an economic slump, even after OPEC announced a record cut in daily production of 2.2 million barrels.
Crude oil rounded out its biggest weekly decline, 27%, since 1991 after the US Energy Department said stockpiles at Cushing, Oklahoma, rose 21% to 27.5 million barrels last week, the highest in about 1 ½ years.
The Standard & Poor's 500 Index gained 0.3% to 887.88 and the Nasdaq Composite rose 0.8% to 1564.32.
Obama raised his target for job creation to 3 million jobs in America over the next two years from his economic-recovery package, up from a previous target of 2.5 million, the New York Times reported.
The Federal Reserve was replaced on Friday by Japan as the developed nation with the lowest benchmark interest rate, after the Bank of Japan cut its key policy rate to just 0.1% from 0.30%.
The BOJ also plans to buy Japanese government bonds and commercial paper outright, to thaw the availability of credit.
In Europe, Belgium's King Albert was in talks with political leaders sparked by Prime Minister Yves Leterme's decision to proffer his government's resignation after a report by the Supreme Court determined there had been political meddling in the bail-out attempt for Fortis.
German Chancellor Angela Merkel said her government would step up efforts to boost the economy next month.
Germany's DAX 30 fell 1.3% to 4696.7 on Friday as Volkswagen fell 7.8% and Continental declined 8%. In France, the CAC 40 fell 0.3% to 3225.9. BNP Paribas led the decline, sliding 8%. Automakers Renault and Peugeot both fell more than 4%. In London, the FTSE 100 Index fell 1%.
The US dollar had its biggest gain in about two months against the euro after the auto aid package was announced and advanced versus the yen after the Bank of Japan cut its benchmark rate almost to zero.
The euro traded at $1.3915 in New York on Friday from as much as $1.4720 the previous day. The dollar gained to 89.27 yen.
Gold had the biggest decline in about three weeks as the US dollar strengthened, reducing the appeal of the precious metal as an alternative investment. Gold futures for February delivery fell 2.7% to US$837.40 an ounce on the New York Mercantile Exchange.
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