From Bloomberg (hat tip to Yves Smith)
Treasury Opens Door to Aid for Broad Array of Firms, Industries
By Rebecca Christie
Jan. 1 (Bloomberg) The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.
The Treasury’s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.
“There are going to be other industries that are going to have just as good a case,” as the auto companies, former St. Louis Federal Reserve Bank President William Poole said in an interview on Bloomberg Television. “We don’t know what those other industries are going to be. Where does this process stop?”
Shares of auto suppliers including American Axle & Manufacturing Holdings Inc. and Lear Corp. jumped yesterday after Treasury announced the guidelines. The Motor & Equipment Manufacturers Association has been lobbying for the use of federal funds as a backstop in case parts makers can’t collect money the auto manufacturers owe them.
Analysts have speculated that companies such as GM’s bankrupt former parts unit Delphi Corp., might be eligible for assistance. The Treasury guidelines may encourage more guessing on what companies and industries are next, said Vincent Reinhart, resident scholar at the American Enterprise Institute in Washington.
Treasury officials “much prefer discretion, and so they would view the statement as being constructively ambiguous,” Reinhart said.
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