Fed to guarantee loans by banks to Detroit?

If I'm understanding what their talking about right now, for quick capital until Congress comes back in session next year.

If I'm understanding what their talking about right now, for quick capital until Congress comes back in session next year.

I was watching on C-Span earlier today, and I got the impression that that was being tossed around.

If that's the case, then this is looking more and more like a classic bailout. The government guarantees to the banks that their loan will not be lost even if Detroit cannot repay it. It's a win-win situation for the banks. Not only will they get the principal from the government should Detroit default, it will also collect interest in the meantime.

Although I have faith that this loan will be repaid eventually.

It's one idea but the Bush Administration and Fed Chief Bernanke are putting up some opposition to it.

I just saw that on Automotive News.
I think the bailed out banks should give the loans to the Big 3 in return for gov. backing. Seems fair to me, but I'm not an expert, nor do I know any of the details.

From Automotive News:
"Some lawmakers said financial institutions that have gotten money from a $700 billion economic rescue program should make government-guaranteed loans to the Detroit 3."

This is rather odd, for several reasons.

First, the bailout money for the banks was supposed to open up credit. Here is a good example of 3 corporations that are critical to the economy of the United States that are seeking a loan. The banks are tightfisted. It's THEIR money, not GM's, so said Paulson.

Second reason, the banks do not have to fear anything IF the government is guaranteeing the loans. After all, the government is not going to allow a financial collapse to happen, since they have been bailing out financial institutions for decades. The government did not allow a financial collapse now, so the banks can feel pretty safe about those loans.

Third, banks LOVE to give loans, as much as they can. Banks are only somewhat careful to individual borrowers (you and me), and small-ish loans. But go into hundreds of millions or even billions, and it's a love affair for them. They give loans to third world countries, they give loans to failing entities in the US, and the more the better. When the borrower defaults, the lender gives more money to the borrower so that he can keep paying the interest. Banks love interest. When eventually the borrower collapses entirely, the bank goes to Washington. The bank gets its principal, and it gets to keep the interest it collected.

Fourth, there was a chastising statement from Rothschild on automakers. Bernanke/Paulson and Bush are supporting it. They are in the same camp actually. Hence they have some vested interest in this play that you are watching right now.

IDK it sounds fine to me. As long as they get the $ they need. If **** doesn't like it, tough! I'm sure there a few people out there who voted for him, that aren't too thrilled with some of the things he's done!