Congress, Will You Drive My Car?

Detroit can breathe a little easier today. The long-predicted bailout of the automotive industry heads to the House of Representatives for a vote, possibly as early as today, after lengthy negotiations concluded yesterday, the Washington Post and New York Times report this morning. The proposal "calls for the government to speed $15 billion in emergency loans to the car companies as soon as next week, and for President Bush to immediately name a car czar to oversee the bailout," according to the Washington Post. "The companies would be required by March 31 to cut costs, restructure debt and obtain concessions from labor sufficient to report a 'positive net present value.'" If the automakers fail to hit their numbers by the end of the first quarter of 2009, they would have to file for bankruptcy protection. Despite the strict concessions, the NYT is dubious that the White House can muster enough Republican support for the deal.

The Wall Street Journal, meanwhile, says the scope of the aid package, which it regards as a partial nationalization of the automakers, is historically significant. "Industrial policy experts compared the scale of the proposals to bailouts of Lockheed Aircraft Corp. and Chrysler Corp. in the 1970s, but noted that the auto rescue would impose far stricter conditions," the newspaper reports. On a positive note, the pool of aid seekers is dwindling. Just General Motors and Chrysler are asking for the aid; for the second straight day, Ford distanced itself from the rest of the pack, insisting it doesn't need the bailout funding, USA Today reports. Overseas, bailout fever is spreading, it appears. Citing a report in the German daily Die Weldt, Volkswagen's financial services unit is seeking a multibillion-euro state aid package, Bloomberg writes.

The early grades on the Treasury Department's handling of the $700 billion bailout fund are about to be released, and they are not expected to be good. The Congressional Oversight Panel for Economic Stabilization, a panel of lawmakers ensuring that taxpayers' money for TARP is being responsibly used, will address its misgivings today, the Washington Post reports. "This is $700 billion we are talking about. I ask tough questions when I buy a car," Elizabeth Warren, chairman of the panel, told the newspaper. The biggest grievance is that there is little visibility on how the banks are using TARP funds and also that little aid is trickling down to American families. The lone Republican on the panel, Rep. Jeb Hensarling of Texas, however, is striking back, saying it's too early to judge the bailout work. "Mr. Hensarling questioned whether the panel’s decisions 'are based on merit and not political considerations' and whether 'every panel member has the resources and rights necessary to conduct effective oversight,'" the NYT writes. He told the newspaper that he "cannot in good conscience approve any reports" until his concerns are addressed.

The world economy faces a rare global recession, according to a new report from the World Bank, the NYT reports. The bank estimates the global economy will grow by just 0.9 percent in 2009, the slowest pace since 1982. These new "projections are among the most dire in a litany of recent gloomy forecasts for the world economy, and officials at the World Bank warned that if they proved accurate, the downturn could throw many developing countries into crisis and keep tens of millions of people in poverty," writes the NYT. With no obvious driver to spur new economic growth, global demand for crude oil is set to decline for the second year in succession, according to forecasts released yesterday by the Energy Information Administration. The EIA believes global consumption will decline by 50,000 barrels a day in 2008 and by 450,000 barrels a day next year. That's "the first occasion a government organisation has said worldwide demand would shrink in 2009," notes the Financial Times.

With demand for commodities in general plummeting throughout the world, mining giant Rio Tinto announced this morning it will cut 14,000 jobs, the BBC reports. The move comes as the world's third-largest mining outfit seeks to cut its $38.9 billion net debt by $10 billion next year. "The moves come just over three weeks after BHP Billiton walked away from its $70 billion bid to buy Rio Tinto, citing in part concerns about Rio Tinto's high debt load," notes the WSJ.

Finally, the NYT reports that "buyers were so eager on Tuesday to park money in the world’s safest investment, United States government debt, that they agreed to accept a zero percent rate of return." The signal it sent was chilling. It's the "market equivalent of shoveling cash under the mattress ... and reflects concerns that a global recession could deepen next year, and continue to jeopardize all types of investments," the NYT writes.