The scope of this 2003 study was actually very broad and somewhat misleading. Although the 1/10 ratio is far-fetched, it is possible, but highly unlikely. It can’t be denied, though, that a failure of our auto industry would affect many individuals and economic areas, including retail (20% of retail spending is auto-related), industrial stocks, steel demand and more.
Wall Street is making a tepid advance today, as volatility and uncertainty rule the markets. Joel Del Bruno and Madlen Read for Associated Press report that many retail investors to the sidelines, while big institutional traders such as hedge funds keep major stock indexes vacillating. Many economists are calling out “recession” and this could be the worst one in decades.
Meanwhile, Henry Paulson, Secretary of Treasury, continues to support his stance on the $700 billion bailout and refuses to shift the funds toward the auto industry. Although having a U.S. auto company fail during such a fragile time for the economy would not be a “good thing,” Paulson told the House Financial Services Committee that he remains against diverting the bailout money, reports Jeannine Aversa for Associated Press.
Despite the Democrats call, and the Detroit’s Big Three, both Bernanke and Paulson are sticking to their opposition regarding a bailout of the auto industry and remain defensive on their strategy for their bailout plan.
They simply do not see the purpose of the Federal aid going to the auto industry, which the capital was intended for shaky financial markets that would, in turn, help stabilize the broader economy.