WASHINGTON — The Big 3 U.S. automakers' CEOs returned to Congress Tuesday to make their second bid for billions of dollars worth of federal loans. On the same day, the National Bureau of Economic Research (NBER) released a report which concluded that the nation is officially mired in a recession.
Chrysler, General Motors and Ford presented restructuring plans to reassure Congress that bailout funds will not go to waste. The automakers revised their projected total needs up from $25 billion to a possible total of $34 billion. Highlights of the new plans include the restructuring of executive pay and sale of corporate jets for all three companies and the possible discontinuation of GM's Pontiac and Saturn brands.
The Big 3's return to Washington coincided with the release of the NBER report, which stated that the nation isn't just in a recession — it's been in one all year. The payroll employment measure, which the NBER indicated was the most reliable key indicator of a recession, reached its peak in December 2007 and has declined every month since. Other indicators — including real personal income, real manufacturing and wholesale-retail trade sales, industrial products, and household employment estimates — peaked between November 2007 and June 2008.
"The committee determined that the decline in economic activity in 2008 met the standard for a recession," the NBER's report stated. "All evidence other than the ambiguous quarterly product-side measure of domestic production confirmed that conclusion."
In Texas to address the Greater Austin Chamber of Commerce, Fed Chairman Ben Bernanke talked about the crisis and the policies his office has implemented. Although he didn't address the news from the NBER, he said recent events have revealed a serious weakness in the financial system.
"As you know, this extraordinary period of financial turbulence is now well into its second year," he said. "Triggered by the contraction of the U.S. housing market that began in 2006 and the associated rise in delinquencies in subprime mortgages, the crisis has become global and is now affecting a wide range of financial institutions, asset classes, and markets."
Despite all the bad news, Bernanke did offer some positives. He discussed the pronounced decline in crude oil and other commodities that have helped reverse what had been a drag on household spending. He also talked about how funding costs for banks and commercial paper issuers have dropped. He added that while the near-term outlook remains weak, there are several factors that are likely to promote a return to solid gains in economic activity, including the stabilization of the housing market.
Bernanke also indicated that the Federal Reserve could provide further help by purchasing longer-term Treasury or agency securities on the open market in substantial quantities. He also said the Fed could provide backstop liquidity to financial institutions, as well as directly to certain financial markets. He concluded by saying the Fed will continue to work with the Treasury, the Federal Deposit Insurance Corporation (FDIC) and other agencies to turn the crisis around.
"I have not discussed the international response to the crisis today, but policymakers abroad as well as those in the United States have taken a series of extraordinary steps to address an extraordinary situation," he said. "I'm not suggesting the way forward will be easy. But I believe that the policy responses taken here and by our international partners, together with underlying vitality and resilience of the American economy, will help restore confidence to our financial system and place our economy back on the path to vigorous growth."