US stocks slump on concerns over car industry bail-outDecember 12th, 2008 - 6:18 am ICT by IANS
New York, Dec 12 (DPA) US stocks declined Thursday over worries that a $14-million emergency loan for the ailing car industry won’t pass in the Senate because of Republican opposition.The House of Representatives approved the bail-out Wednesday night, imposing strict oversight rules in exchange for keeping General Motors Corp and Chrysler LLC out of bankruptcy at least until April.
But passage appeared less likely in the closely-divided Senate: Democrats hold only a 50-49 majority, and 60 votes will likely be needed due to a procedural measure that can be used by opponents to block legislation.
Mitch McConnell, the top Republican in the chamber, came out in opposition to the House legislation Thursday, dealing a significant blow to the bail-out’s chances.
“We simply cannot ask the American taxpayer to subsidize failure,” McConnell said in a speech before the Senate, criticizing the legislature for being selective in its choice of which industries to rescue.
“A lot of Americans are asking where their bail-out is. They wonder why one business would get support over another,” he said.
“Whether the auto bail-out turns out to be a band-aid or a real long-term plan is uncertain, and as we all know uncertainty is anathema to the equity markets,” Richard Weiss, chief investment officer at City National Bank in Beverly Hills, California, told Bloomberg Television. “Right now it’s political football.”
The markets had rallied Tuesday, optimistic that legislation to prevent a collapse of the country’s automotive industry would be passed soon.
On Thursday, General Motors Corp and Ford Motor Co dropped by more than 10 percent. While Bank of America Corp tumbled 11 percent, General Electric Co fell 5.3 percent.
The blue-chip Dow dropped 196.33 points, or 2.24 percent, to 8,565.09. The broader S&P 500 fell 25.65 points, or 2.85 percent, to 873.59. The technology-heavy Nasdaq Composite Index shed 57.60 points, or 3.68 percent, to 1,507.88.
The US currency fell to 75.01 euro cents from 76.76 euro cents on Wednesday. It also dropped against the Japanese currency, to 91.54 yen from 92.75 yen on Wednesday.
Tags: bank of america corp, chief investment officer, city national bank, ford motor co, general electric co, general motors corp, mitch mcconnell, nasdaq composite index, new york dec, republican opposition