Evidence of a recession piled ever higher Friday, with new figures showing Americans are spending less and gloomy about the economy, while the government signaled it won’t buy stock in the financing arms of auto companies to prop them up. The Commerce Department reporteddropped a sharp 0.3 percent in September while their incomes, the fuel for future spending, managed only a small 0.2 percent gain.
By MARTIN CRUTSINGER, AP Economics Writer
That followed a report a day earlier that the U.S. economy shrank by 0.3 percent in the third quarter. The accepted definition of a recession is two straight quarters of a shrinking economy.
Closing out the worst October in 21 years but one of the best weeks ever, investors did some bargain shopping on Wall Street, snapping up stocks that have plunged in value. The Dow Jones industrial average gained nearly 145 points.
Wall street broker Michael Kilkenny works the trading floor of the New York Stock Exchange shortly after the market opened Tuesday, Oct.28, 2008 (AP Photo/David Karp)
Meanwhile, the outgoingsent signals to automakers and other industries hoping for government purchases of their stock that they probably won’t qualify for the program.
Administration officials, who spoke on condition of anonymity because the program is still being put together, said it was unlikely the auto companies would be able to qualify for direct government purchases of stock in their auto-financing arms as part of the $250 billion stock purchase program.
They could still be eligible for government purchases of bad assets, such as auto loans, under a separate program that is expected to spend $100 billion initially. The government plans to buy stock in banks and lift bad assets on their books as part of the financial system bailout.
The wrangling over the broader rescue program continued, with Democrats stressing Congress wants the package to be used to pump new loans into the economy, not diverted to stockholders or executives or to buy other banks.
“I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed,” said House Barney Frank, D-Mass. He announced hearings on the rescue package Nov. 12 and 18.