Blog: The credit problem
Dave Leggett | 19 December 2008
I have just been chatting with Michelle Krebs over in snowy Detroit about today's developments on the 'bailout' of GM and Chrysler. The loans buy some time. How tight is it? Well, the energy department loan finance is on top, so it's maybe much better than it looks. This should see Detroit through to March 31.
Michelle made a very good point, which is that the underlying problem is the need for the banks to get lending again in order for market volume to recover.
Edmunds.com estimates that December's US sales will come in at 38% down on last year with a SAAR of just 9.8m units. Yes folks, an annualised running rate under 10m units. In 2007, the market was over 16m units.
There's certainly plenty for Obama to think about when he contemplates what Bush is handing over in January. And that's when the looking beyond the 'bridge to a bridge' gets going in earnest.
Just how do you get the banks lending again? As BO himself has observed, super-low 0% interest rates don't do a lot of good if you would like the finance but just can't get it.
President Bush has announced that his administration will provide US$13.4bn in short-term loans to GM and Chrysler. The money will come from the US$700bn Troubled Asset Relief Programme (TARP), origin...
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