The US hastily cobbled $14 billion bailout for Detroit has died in the Senate after failing on a procedural vote.
Bipartisan talks on the rescue broke down over Republican demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.
Majority Leader Harry Reid is now hoping that President George W. Bush would tap Hank the Bank's back pockey US$700 billion Wall Street bailout fund for emergency aid to the automakers.
Senate Republican leader Mitch McConnell of Kentucky led a revolt in announcing his opposition to the White House-backed rescue bill passed by the House on Wednesday. Mitch isued a Press release We Simply Cannot Ask the American Taxpayer to Subsidize Failure wich is well worth reading ..and quoting..
...its greatest single flaw is that it promises taxpayer money today for reforms that may or may not come tomorrow.
We simply cannot ask the American taxpayer to subsidize failure.
He and other Republicans said wages and benefits for employees of Detroit's Big Three dinosaurs should be renegotiated to bring them in line with those paid by Japanese carmakers Toyota, Honda and Nissan in the United States.
Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.
Republican Sen. George V. Voinovich of Ohio, a strong bailout supporter, said the UAW was willing to make the cuts — but not until 2011....which is shorthand for never.
GM claims their total hourly labor costs are now US$69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around US$48. The Japanese automaker has far fewer retirees and less generous pension and health care benefits as UAW workers.
A Pew Research Centre poll said 39 % approved the "loans" to keep GM, Ford and Chrysler in business, This broke down to 45 % Democrats and 31 % Republicans supporting the proposal.
Detroit's problems are far more fundamental and historical than shop floor pay scales. They have too many brands, too many models, they burn too much gas, their build quality is poor ... and the whole industry is struggling because the buyers don't have the money and cannot / will not take the loans to buy new vehicles.
Wall Street is going to sink like stone... see also "Bernard L. Madoff, the founder of Bernard L. Madoff Investment Securities and a fixture of the Wall Street trading world for decades, was arrested Thursday morning by Federal Bureau of Investigation agents and charged with criminal securities fraud by federal prosecutors in Manhattan." WSJ
Apparently Madoff, 70, told senior employees on Wednesday that his business was "a giant Ponzi scheme."
Plenty more of those due to fail yet.
UPDATE : By 0816 GMT the FTSE 100 was down 147.1 points, or 3.35%, at 4,241.59, with bank shares seeing the biggest falls.
Royal Bank of Scotland shares fell 13.8%, HBOS shares were down 10.1% and Barclays dropped 9.4%.