Auto industry looking for a bailout, too

Some interesting news worth mentioning: It looks like the AUTOMAKERS are now joining the list of companies shopping for bailout money in Washington -- perhaps $25 billion in subsidized, low-interest federal loans. From a Reuters story this afternoon:

"The Big 3 Detroit-based automakers are seeking about $25 billion in federal loans as they struggle to ride out a steep downturn in U.S. auto sales, The Wall Street Journal reported on Friday.

"Lobbyists for the U.S. automakers -- General Motors Corp, Ford Motor Co and Chrysler LLC -- briefed White House officials, as well as U.S. Rep. John Dingell and other Michigan Democrats, on a possible bailout and plan to unveil the proposal after Labor Day, according to the report.

"The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.

"Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said."

A separate Bloomberg story says GM, Ford, and Chrysler want even more - $50 billion -- with 25 up front and 25 in subsequent years.

This is the problem with bailouts. You do it for someone, you have to do it for everyone.

Think back to when the Fed started its whole TAF and TSLF programs. Originally, they were largely designed to support the residential mortgage market. But then the financial industry whined and complained about how commercial mortgage backed securities markets had tightened up. So CMBS were added to the Fed's mix of eligible TSLF securities. Then, the student loan lenders joined in the chorus, asking the Fed to accept asset-backed securities packed with student loans. The Fed obliged.

Of course, the Fed had to follow up with the PDCF once it became clear that non-bank primary dealers might at some point need to tap into the Fed's largesse. And all of these facilities show no sign of being cut off any time soon, a point made clear today when Bernanke said the following:

"Briefly, these programs are intended to mitigate what have been, at times, very severe strains in short-term funding markets and, by providing an additional source of financing, to allow banks and other financial institutions to deleverage in a more orderly manner. We have recently extended our special programs for primary dealers beyond the end of the year, based on our assessment that financial conditions remain unusual and exigent. We will continue to review all of our liquidity facilities to determine if they are having their intended effects or require modification."

Of course, you don't need me to tell you the mother of all bailouts could also be in the works for Fannie Mae and Freddie Mac. This all begs the question: When is enough, enough?