From The Wall Street Journal
Treasury Considers Plan to Stem Home-Price Decline
The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new home loans, according to people familiar with the matter.
The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.
Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.
Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.
Auto Union Open to Changes in Contract
The United Auto Workers will allow U.S. auto makers to delay payments into a massive health-care trust and suspend the controversial jobs bank program for laid-off workers, part of an effort to help Detroit's struggling auto makers secure emergency federal loans.
The UAW will modify the contracts reached last year with the Detroit Three to help cut costs as the companies try to convince Congress they can survive if given a federal bailout. Modification will require the UAW to assemble bargaining committees and commence negotiations with the companies.
"We're willing to take an extra step here," President Ron Gettelfinger said Wednesday following a meeting with union leadership. He said union leaders are able to suspend the jobs bank and push back payments to the health-care trust without renegotiating the labor contract. But further changes will require bargaining and a vote by UAW members.
"'Concessions," I used to cringe at that word. But now, why hide from it? That's what we did," Mr. Gettelfinger said.
His comments came one day after General Motors Corp., Ford Motor Co. and Chrysler LLC submitted wide-ranging restructuring blueprints to Congress in the hopes of qualifying for a combined $34 billion in low-interest federal loans. GM and Chrysler say they both need money immediately to avoid collapse, while Ford says it would hope not to have to draw from any credit line.
Cutting Costs
The auto makers are hoping to negotiate concessions from the UAW to bring the cost structures of the Detroit Three more in line with those of foreign auto makers in the U.S.
The health-care trust, commonly referred to as VEBA, was supposed to begin paying benefits to retirees starting Jan. 1, 2010, and is considered a key component of the companies' efforts to reduce labor obligations. However, the auto makers are running short of liquidity and likely unable to come up with the billions of dollars needed to initially fund the trust.
U.S. auto makers are burning through cash at an alarming pace as auto sales in the U.S. and abroad plunge. On Tuesday, Ford reported a 30% decline in its U.S. sales in November versus the year-ago period, while GM and Chrysler each saw their sales drop more than 40%.
As for the jobs bank program, which provides many laid-off workers with most of their pay and benefits, Mr. Gettelfinger said the program has shrunk dramatically, but remains a "lightning rod" for critics of the domestic auto industry.
"Jobs bank has become a sound byte that people use to beat us up," he said. GM and Ford have reduced their jobs banks by nearly 80,000 workers in recent years. The Detroit Three auto makers currently have 3,500 workers in the jobs bank.
'Change With The Times'
Mr. Gettelfinger made the case that a failure of one of Detroit's auto makers would trigger a collapse of at least one of the other auto makers along with suppliers, auto dealers and other companies that depend on GM, Ford and Chrysler for business.
Auto makers made similar statements in the letters sent to Congress on Tuesday.
The UAW will drive that point with an ad campaign that asks for help for Main Street and reminds Congress that the auto industry is not the banking system, which just received a $700 billion federal bailout.
"If Wall Street can get help so should Main Street," one spot will say.
Mr. Gettelfinger also emphasized that the auto makers are presenting a detailed plan that promises to repay the loans. He also noted that other nations are being asked to extend support to their auto industries.
Hundreds of local UAW officials convened for Wednesday's meeting, which Mr. Gettelfinger described as an "unprecedented" gathering of officials representing workers from all three auto makers.
Several said they believe members would grudgingly support the concessions, though some said they planned to oppose further givebacks.
"We're in a fight for survival," said Doug Rice, president of UAW Local 122, representing Chrysler workers. "We're going to have to look at how we do things so we can live today to survive tomorrow."
Rory Gamble, a regional UAW director for Ford, said union leaders have to present a plan that's fair and appropriate for members.
"I'm pretty sure they'll accept that," he said. "You've got to change with the times," he added, noting that the union will look for guarantees down the road when the companies rebound.
Source: The Wall Street Journal
Treasury Considers Plan to Stem Home-Price Decline
The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new home loans, according to people familiar with the matter.
The plan, which is in the development stages, would use mortgage giants Fannie Mae and Freddie Mac to bring loan rates down as low as 4.5%, a full percentage point lower than the prevailing rates for 30-year fixed mortgages.
Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.
Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.
Auto Union Open to Changes in Contract
The United Auto Workers will allow U.S. auto makers to delay payments into a massive health-care trust and suspend the controversial jobs bank program for laid-off workers, part of an effort to help Detroit's struggling auto makers secure emergency federal loans.
The UAW will modify the contracts reached last year with the Detroit Three to help cut costs as the companies try to convince Congress they can survive if given a federal bailout. Modification will require the UAW to assemble bargaining committees and commence negotiations with the companies.
"We're willing to take an extra step here," President Ron Gettelfinger said Wednesday following a meeting with union leadership. He said union leaders are able to suspend the jobs bank and push back payments to the health-care trust without renegotiating the labor contract. But further changes will require bargaining and a vote by UAW members.
"'Concessions," I used to cringe at that word. But now, why hide from it? That's what we did," Mr. Gettelfinger said.
His comments came one day after General Motors Corp., Ford Motor Co. and Chrysler LLC submitted wide-ranging restructuring blueprints to Congress in the hopes of qualifying for a combined $34 billion in low-interest federal loans. GM and Chrysler say they both need money immediately to avoid collapse, while Ford says it would hope not to have to draw from any credit line.
Cutting Costs
The auto makers are hoping to negotiate concessions from the UAW to bring the cost structures of the Detroit Three more in line with those of foreign auto makers in the U.S.
The health-care trust, commonly referred to as VEBA, was supposed to begin paying benefits to retirees starting Jan. 1, 2010, and is considered a key component of the companies' efforts to reduce labor obligations. However, the auto makers are running short of liquidity and likely unable to come up with the billions of dollars needed to initially fund the trust.
U.S. auto makers are burning through cash at an alarming pace as auto sales in the U.S. and abroad plunge. On Tuesday, Ford reported a 30% decline in its U.S. sales in November versus the year-ago period, while GM and Chrysler each saw their sales drop more than 40%.
As for the jobs bank program, which provides many laid-off workers with most of their pay and benefits, Mr. Gettelfinger said the program has shrunk dramatically, but remains a "lightning rod" for critics of the domestic auto industry.
"Jobs bank has become a sound byte that people use to beat us up," he said. GM and Ford have reduced their jobs banks by nearly 80,000 workers in recent years. The Detroit Three auto makers currently have 3,500 workers in the jobs bank.
'Change With The Times'
Mr. Gettelfinger made the case that a failure of one of Detroit's auto makers would trigger a collapse of at least one of the other auto makers along with suppliers, auto dealers and other companies that depend on GM, Ford and Chrysler for business.
Auto makers made similar statements in the letters sent to Congress on Tuesday.
The UAW will drive that point with an ad campaign that asks for help for Main Street and reminds Congress that the auto industry is not the banking system, which just received a $700 billion federal bailout.
"If Wall Street can get help so should Main Street," one spot will say.
Mr. Gettelfinger also emphasized that the auto makers are presenting a detailed plan that promises to repay the loans. He also noted that other nations are being asked to extend support to their auto industries.
Hundreds of local UAW officials convened for Wednesday's meeting, which Mr. Gettelfinger described as an "unprecedented" gathering of officials representing workers from all three auto makers.
Several said they believe members would grudgingly support the concessions, though some said they planned to oppose further givebacks.
"We're in a fight for survival," said Doug Rice, president of UAW Local 122, representing Chrysler workers. "We're going to have to look at how we do things so we can live today to survive tomorrow."
Rory Gamble, a regional UAW director for Ford, said union leaders have to present a plan that's fair and appropriate for members.
"I'm pretty sure they'll accept that," he said. "You've got to change with the times," he added, noting that the union will look for guarantees down the road when the companies rebound.
Source: The Wall Street Journal
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