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 It's going to be an ugly day on Wall Street as the $14 billion bailout of the auto industry ran out of gas last night. With General Motors Corp. warning that it doesn't have enough cash to get through the next three weeks, investors are furiously selling off the already beaten-down stock in premarket trading. By 8 a.m., GM was down 31%, and Ford Motor Co. had lost 18%.
However, unlike in September, when Republicans defeated the first TARP
bill, sending the Dow 600 to 700 points lower, credit markets aren't
locking up. With their own existence not on the line, banks appear
ready to keep lending to other banks and corporations. One-month LIBOR
actually fell 15 basis points to 1.04% Friday morning, and three-month
LIBOR tightened 5 basis points to 1.92%.
Additionally, the TED Spread, a measure of bank's willingness to lend to businesses, fell early in the day as well. The spread declined 8 basis points to 1.91%. When the TARP bill first failed, investors fled to Treasuries, which continues to this day as the yield on T-bills is already at 0%. However, with as many as 2.5 million people with employment tied to the auto industry, the consequences for credit markets and the wider economy of a bankruptcy for any of the Big Three will likely be severe. - George White See story on automaker bailout on TheDeal.com See Dealscape post on credit markets after TARP See Crisis Dashboard from credit market data See TheDeal's feature story on GM headed for bankruptcy Categories Deal Video
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