preview

The Government Bailout Saved the Automobile Industry

Good Essays
In the latter part of 2008, the United States’ economy was rapidly plummeting - the stock market crashed, the housing bubble burst and gas prices skyrocketed. The majority of U.S. based firms faced the reality that they would not be able to survive during such desperate economic times. The U.S. automobile industry, in particular, began to buckle under the depressed economy. The government stepped in proposing a multi-billion dollar bailout to stimulate the economy and restore economic balance. The possibility of this unprecedented government intervention was condemned by many economists. If the government helped the ailing automotive industry, this industry would have to tighten their expenditures and plan for the future to prove to critics of the bailout that they would use the government funding to add value to the economy once again. President Bush signed the Emergency Economic Stabilization Act (EESA), more commonly called “the bailout bill,” into law in October of 2008 (Woods, 2009). Under this framework, the Secretary of the Treasury enacted the Troubled Asset Relief Program (TARP) to buy up delinquent mortgages and buy ownership stakes in banks (Muolo, 2009). To fund the $700 billion economic revival, American taxpayers would be forced to foot the bill. The Emergency Economic Stabilization Act was not the first time in U.S. history that the government intervened in improving the nation’s economic status. After the Great Depression, President Roosevelt provided economic stimulus packages to revive banking systems and various aspects of U.S. agriculture (“History of Government Spending,” n.d.). In fact, President Roosevelt is also accredited for launching the Social Security Act and providing protection for unions and mig... ... middle of paper ... ...ailout despite $14.6 billion loss. The Times. Retrieved June 23, 2011, from http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article561193 Stoll, J., Dolan, M., McCracken, J., & Mitchell, J. (2008, December 3). Big Three Seek $34 Billion Aid. Wall Street Journal. Retrieved June 23, 2011, from http://online.wsj.com/article/SB122823078705672467.html Taylor, E. (2008, February 28). Auto Makers Shift to Offset Effects of Soaring Euro. Wall Street Journal. Retrieved June 23, 2011, from ABI/INFORM Global (1436135321). Weil, N. (2008, September 1). Saving Chrysler; At the struggling automaker, private-equity ownership drives IT to slash costs through outsourcing and retool to compete globally. CIO. Retrieved June 23, 2011, from ABI/INFORM Global (1559192691). Woods, T. E. (2009). Meltdown. Washington, DC: Regnery Publishing, Inc.