Alexander Nye

Publisher

Yale University: School of Management: Yale Program on Financial Stability (YPFS)

Media Date

3-1-2020

Media Type

Document

Content Type

Working Paper

Country/Region

Canada; United States

Language

English

Crisis

Global Financial Crisis (2007-2009)

Case Series

2020 YPFS Preliminary Discussion Drafts

Intervention

Non-bank Restructuring; Not Applicable

Additional Information

In fall of 2008, America's Big Three automakers neared their breaking point. Two of them, General Motors (GM) and Chrysler, asked Congress for funding to prevent uncontrolled bankruptcies. Policymakers realized these uncontrolled bankruptcies would damage the manufacturing sector. Congress considered but failed to pass, a framework conditioning short-term financing on the companies producing acceptable restructuring plans. With the companies warning that they could not survive the coming presidential transition, on December 19, 2008, President Bush announced the Automotive Industry Financing Program under the authority of the Emergency Economic Stability Act of 2008, which made up to $17.4 billion available to the two companies. After two extensions to GM, the government would lend a total of $23.4 billion to GM and Chrysler under this program, funding the companies from late 2008 through their mid-2009 bankruptcies (the"Bridge Loans"). This case discusses these Bridge Loans, which appeared to enable the companies to survive the presidential transition and begin creating plans to survive bankruptcy.

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