During the week, I did a blog entry on how the Federal Reserve was bailing out banks around the world, trying to keep the international financial system afloat after the damage done by one of America's biggest exports, dodgy securities. The bailouts of the banks was bad enough. Now we discover that the Fed was actually propping up American industry.
Check the reports that Ford, Toyota and BMW got $26.8 billion from the Federal Reserve. Indeed, the Federal Reserve lent $57.9 billion to the American auto industry which has been struggling to keep up in a market where people are buying fewer cars, or are buying foreign cars that use less fuel. The revelations of the handouts have only come out now.
Normally, the Fed only lends money to banks but when the financial crisis hit, it started lending money to corporations directly. That's very unusual.
As reported, they still owe the Fed $2 billion which would build a lot of hospitals, and provide more support for the unemployed which has now hit 9.8% at a time when Congress, in its wisdom, is sowing the seeds of social unrest by cutting benefits.
With Ford's restructuring, and the bankruptcies of General Motors and Chrysler, the US auto industry has shrunk and cut costs right back. There are signs it's recovering but the industry will be a lot smaller. There's no point selling millions of cars when you're losing money on them, nor is there any point clearing inventory by extending credit on reckless terms and offering huge rebates.
The question is whether the Fed should be asking US taxpayers to pay nearly $60 billion supporting an industry that's been struggling to make money.
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