U.S. judge allows Madoff to stay out of jail [By Grant McCool Grant Mccool, NEW YORK (Reuters) ]

By Grant McCool Grant Mccool 6 mins ago

NEW YORK (Reuters) – Accused swindler Bernard Madoff will be allowed to stay in his Manhattan apartment under house arrest, a U.S. judge ruled on Monday, rejecting a government request to throw him in jail.

The ruling gives Madoff, who has become one of the most vilified figures in America, more time in his $7 million home before he pleads guilty or goes to trial, as authorities probe a $50 billion investment fraud to which they say he confessed a month ago.

Madoff’s lawyers have said their client is cooperating with government investigations following his December 11 arrest for what would be the biggest Ponzi scheme in history — a fraud in which early investors are paid off with the money of new clients.

The government has until mid-February to convince a grand jury to bring an indictment against Madoff, a former chairman of the NASDAQ stock market and a figure for more than 40 years in a financial industry already reeling in crisis.

It is not unusual for people accused of white-collar crimes to be offered bail packages, and at this stage of the case, indictments could come at any time, legal experts said.

Monday’s written ruling by Magistrate Judge Ronald Ellis of U.S. District Court in Manhattan said: “Aside from the bare assertion that there remains some risk of flight, the government has failed to articulate any flaw in the current conditions of release.”

Prosecutors last week asked the judge to revoke bail, arguing that Madoff had violated a December 18 court order freezing his assets by mailing more than $1 million worth of valuables to relatives and friends.

They said he was a flight risk and could cause further economic harm to investors by dispersing his belongings.

Legal experts said it was hard for the government to argue that 70-year-old Madoff might flee.

“The guy is on electronic monitoring, he has a guard watching him every day, and the press is watching his every move,” said Daniel Margolis, a partner at law firm Pillsbury Winthrop Shaw Pittman LLP and a former federal prosecutor.

“So fleeing the country under these conditions would require an escape plan of cinematic proportions.”

Ellis turned down the government’s bid to jail Madoff but imposed more curbs as part of the bail conditions — searches of his mail and ordering him to provide the government with a list of portable valuables, to be checked every two weeks.

“The decision speaks for itself,” said Daniel Horwitz, one of Madoff’s lawyers.

The U.S. Attorney’s office in Manhattan declined comment.

Aside from parallel criminal and civil investigations, a court-appointed trustee is overseeing the winding down of Bernard L. Madoff Investment Securities LLC.

Separately on Monday, a bankruptcy court granted trustee Irving Picard the powers to subpoena witnesses and documents. Picard had asked the court for the added powers, contending that the vast scope of the purported fraud made them necessary.

Madoff, has not formally answered one charge of securities fraud in court. He is the only person the government has so far accused.

Fraud experts said the purported scheme was too complicated and went on too long to have been carried out by Madoff alone.

Wealthy investors, banks, hedge funds and charities worldwide have all declared themselves victims of the purported fraud. A hedge fund manager, a Frenchman, committed suicide in his New York office last month in distress.

If convicted, Madoff would face up to 20 years in prison and millions of dollars in fines. According to court documents, he confessed to his sons a month ago that for many years he ran a “giant Ponzi scheme” with losses of $50 billion.

The items mailed by Madoff and his wife in late December included a diamond necklace, 13 watches, an emerald ring, two sets of cuff links, a diamond bracelet and diamond brooches, according to court papers.

Madoff’s lawyer argued that he “simply did not realize” that sending personal items would contravene the court order freezing his assets.

The case is 08-02735 USA v. Madoff in U.S. District Court for the Southern District of New York (Manhattan)

(Additional reporting by Martha Graybow and Edith Honan; editing by John Wallace and Gerald E. McCormick)

Copyright © 2009 Reuters Limited. All rights reserved.

Insight: Quantitative steps mustn’t end in dollar rout [By Mansoor Mohi-uddin]

By Mansoor Mohi-uddin Mon Jan 12, 10:20 am ET

The dollar has begun to weaken again after the Federal Reserve last month cut its interest rate target to zero and shifted more explicitly towards a policy of quantitative easing.

As the December Federal Open Market Committee meeting minutes show, America’s central bankers expect to keep interest rates super low for the foreseeable future while continuing to expand the Fed’s balance sheet.

At the same time US fiscal policy is also set to be loosened aggressively. The Obama administration’s likely stimulus package will push America’s budget deficit well above one trillion dollars this year.

Washington’s policymakers have little choice as they aim to prevent America’s economy tipping into depression. But they need to be aware of the risks to the dollar.

Zero interest rates, a contracting economy, a still large current account deficit and suspicious foreign investors are a potent combination that could lead to a rout of the greenback.

A dollar collapse is not inevitable. In order to keep investor confidence in America intact, US officials should take the following steps.

First, the Fed should make it clear it will not consider buying foreign assets as it undertakes quantitative easing. America’s central bank has already begun buying domestic mortgage backed securities. But purchasing foreign currency denominated assets would cause the dollar to fall sharply.

Second, Fed officials should stress that quantitative easing will be curtailed once it becomes clear America’s economy is stabilising. The signals in the latest FOMC minutes that the Fed will keep moving towards inflation targeting – implicitly if not explicitly – are welcome.

This will assuage concerns that US policymakers want to inflate their way out of recession, soaring fiscal deficits and record private sector debt. Ben Bernanke’s initial four year term expires in a year’s time. If President Obama doesn’t reappoint him, the Fed Chairman will want to leave a legacy that includes a more prominent role for inflation targeting in the setting of US monetary policy. That will benefit the dollar now.

Third, exchange rate policy in America is the responsibility of the US Treasury. Once they take office Tim Geithner and Larry Summers should both make a clear commitment to preserving the value of the greenback. After all, former Treasury Secretary Summers was one of the original advocates of the ‘strong dollar policy‘ in the 1990s.

Fourth, the new Obama administration must avoid the policy mistakes made during the early years of the last Democrat administration. President Clinton’s first Treasury Secretary, Lloyd Bentsen, decided to talk down the dollar against the yen to force Japan to open its markets more to American exports. Such crude protectionism now would quickly cause a run on the greenback in the current economic circumstances.

Last, America should re-assure its allies in Europe, the Middle East, Asia and Latin America that it does not seek to devalue the dollar. The G7 remains the obvious forum to keep the world’s wealthy democracies on side. If the dollar starts to slide precipitously this year, the G7 is likely to consider co-ordinated intervention in the currency markets.

This would be the first time for such action since the European Central Bank persuaded the Fed and the Banks of England, Canada and Japan to prop up the weak euro in September 2000. But the allies that really count here are not America’s G7 partners. Instead it is the large foreign exchange reserve holders of Saudi Arabia, UAE, Taiwan, South Korea and Singapore that shelter under America’s security umbrella. It is clearly not in these countries’ interests to see the currency of their principal military ally suffer an outright collapse.

These are some of the steps needed to prevent quantitative easing in America turning into a rout for the dollar. Fortunately for the greenback, US policymakers are not alone. Already Bank of Japan, Bank of England and Swiss National Bank officials have acknowledged the risks that their institutions will also shift towards quantitative easing as they cut interest rates towards zero. Once the ECB follows suit, there will once again be no major alternative to the dollar as the world’s reserve currency.

The writer is managing director of foreign exchange strategy at UBS Investment Bank

 

Copyright © 2009 Yahoo! Inc. All rights reserved.

Wall Street: The Bright Side of a Bad 2008 [By Roben Farzad and Ben Levisohn]

By Roben Farzad and Ben Levisohn Roben Farzad And Ben Levisohn Fri Jan 9, 8:08 am ET

Last year was that rare wrinkle in history when everything that could go wrong did go wrong. Stocks and real estate imploded. Bank failures abounded. Fannie Mae, Freddie Mac, and AIG became wards of the state, while the Federal Reserve had to double its balance sheet in the course of a few weeks.

Oh, and Wall Street as we knew it pretty much died.

But the crash was good in one small (O.K., minuscule) sense: It separated the truly wise managers in finance from the highly paid pseudo-geniuses whose years of success turned out to be a bull market mirage. The few bankers and hedge fund pros who stuck to the basics of lending and investing during the mortgage boom are now inheriting the earth. Most of the rest are exploring other career options. With any luck, some of the physicists and engineers who flocked to trading floors in recent years will flock back to science labs to create things.

 

Asleep At The Wheel

Where was the foresight? Almost all of the managers who were supposed to see the wreck coming did not. Most glaring were Bear Stearns’ James E. Cayne and Lehman Brothers’ Richard S. Fuld Jr., who morphed from bond gurus to credit casualties practically overnight. Much of the blame for the meltdown also lies with the phalanx of highly compensated executives just below the C-suite — the risk managers and trading chiefs who failed to avoid the carnage.

 

Two managers who did sidestep the crash are in position to help shape the future of banking. JPMorgan Chase (NYSE:JPM – News) CEO Jamie Dimon got federal help to acquire Bear Stearns and Washington Mutual and now sits at the helm of a dominant global firm. Bank of America’s (NYSE:BAC – News) Kenneth D. Lewis snatched Merrill Lynch (CDNX:MER.V – News) from the jaws of bankruptcy, a move that could vault BofA near to the top of investment banking.

And what of the supposed sophisticates managing the world’s biggest hedge funds? Most of them blew it, too. Now some are closing up shop — and throwing hundreds of onetime masters of the universe out of work. Chicago’s Hedge Fund Research says hedge funds lost an average of 19.4% through November as billions of investor dollars fled. SAC Capital Advisors saw its Multi-Strategy Fund lose 13% through November, even though the fund is supposed to make money in any environment. The two main funds of Kenneth C. Griffin’s Citadel Investment Group were hit with $1.2 billion in withdrawal requests.

Most hedge funds charge clients 50% of their profits and 2% of assets under management. None has agreed to refund to clients half their losses, but Renaissance Technologies’ James Simons has waived the management fee for his year-old futures fund, which lost 12% in 2008. Perhaps he has started a trend.

The small winner’s circle included longtime subprime skeptic John Paulson, whose largest fund returned 38% through Dec. 19. But the biggest hedge fund victor may be James Chanos, whose Kynikos Associates (Greek for cynic) shorted its way to a 50%-plus gain through November. That, of course, is cold comfort for the millions of ordinary investors who had their money in stocks.

Return to the Best Managers Table of Contents

 

Copyright © 2009 Yahoo! Inc. All rights reserved.

Consumer credit posts record drop in November [WASHINGTON (Reuters)]

Thu Jan 8, 3:48 pm ET

WASHINGTON (Reuters) – Consumer borrowing dropped by a record $7.94 billion in November, a Federal Reserve report showed on Thursday, the latest evidence that households were unwilling or unable to take on more credit.

That was the biggest decline since the data series began in January 1943, and was far steeper than the $0.5 billion dip that economists polled by Reuters had expected.

The November decline represented a drop of 3.7 percent, the largest percentage fall since January 1998, when it was down 4.3 percent.

October’s credit tally was revised to a drop of $2.78 billion, from an originally reported fall of $3.54 billion.

Non-revolving credit, which includes closed-end loans for big-ticket items like cars, boats, college educations and holidays, fell $5.18 billion, or 3.9 percent, to $1.597 trillion.

Revolving credit, made up of credit and charge cards, fell $2.76 billion, or 3.4 percent, to $973.5 billion.

Banks have been cutting credit lines, canceling unused credit cards and imposing tougher qualifications for loan approval as they try to limit their exposure to consumer debt.

Soaring unemployment has caused more Americans to fall behind on loan payments than at any time since 1980, and delinquencies are likely to head higher, the American Bankers Association said on Wednesday.

A Labor Department report on Friday is expected to show that 550,000 jobs were lost in December, pushing the unemployment rate to 7 percent from 6.7 percent in November, according to a Reuters survey of economists.

(Reporting by Emily Kaiser; Editing by Theodore d’Afflisio)

 

Copyright © 2009 Reuters Limited. All rights reserved.

Paulson says changes needed at Fannie, Freddie [By MARTIN CRUTSINGER, AP Economics Writer]

By MARTIN CRUTSINGER, AP Economics Writer Wed Jan 7, 5:22 pm ET

WASHINGTON – Treasury Secretary Henry Paulson on Wednesday said the best option for the future of Fannie Mae and Freddie Mac could be for the mortgage giants to be run like public utilities.

In what could be his last speech as Treasury secretary, Paulson said that allowing the two companies to return to their previous operating approach was not an option.

Fannie Mae and Freddie Mac were taken over by the government in September and placed in a conservatorship after mounting mortgage losses put them in operating distress that was a prelude to the broader financial crisis that hit Wall Street last year.

Under Paulson’s proposal, Congress would replace Fannie and Freddie with one or two private sector entities that would purchase and securitize mortgages with a credit guarantee backed by the federal government. The new companies would be privately owned but governed by a rate-setting commission that would establish a targeted rate of return, he said.

Paulson said this approach “could be the best way to resolve the inherent conflict between public purpose and private gain.”

Congress and the next administration must decide the proper role government should play in supporting home ownership in light of the severe economic costs imposed on the nation from the bursting of the housing bubble, Paulson said.

“With the knowledge of recent experience, we have a responsibility to begin work now on a long-term (government sponsored enterprises) structure which avoids the dangerous mix of policy and market distortions created by the former flawed GSE mode,” he said.

Paulson offered his thoughts on a variety of possible solutions in his remarks before the Economic Club of Washington. He found fault with most of the other proposals he examined.

One option would be to remove all direct and indirect government support and privatize the companies by breaking them up and selling them. But drawbacks to that approach included that it would likely offer a low rate of return to potential investors, he said.

“I am skeptical that a ‘break it up and privatize it’ option will prove to be a robust or even viable model of any substantial scale without some sort of government support or protection,” Paulson said.

Washington-based Fannie Mae and McLean, Va.-based Freddie Mac own or guarantee around half of the $10.6 trillion in U.S. outstanding home loan debt.

Responding to a question after his speech, Paulson indicated that the Bush administration is likely to leave it up to the administration of President-elect Barack Obama to decide how the second half of the $700 billion financial rescue fund should be spent.

Last month, Paulson said that the loans being extended to automakers General Motors Corp. and Chrysler LLC had effectively used up the first half of the fund and Congress should move to authorize the last $350 billion.

However, for that to occur, the administration would have to submit a report to Congress detailing how it planned to use that money.

He said the administration had discussions with the Obama team, but no decision had been reached to formally request the last $350 billion.

“The only decision-maker as to how that money is going to be used, how those funds are going to be used is going to be the Obama administration,” Paulson said. “We’ve been quite clear with them that if they would like us to notify Congress on their behalf … we’re willing to work with them on it.”

 

Copyright © 2009 The Associated Press. All rights reserved.

U.S. puts up $6 billion to support auto lender GMAC [By Mark Felsenthal, WASHINGTON (Reuters)]

U.S. puts up $6 billion to support auto lender GMAC

By Mark Felsenthal Mark Felsenthal 34 mins ago

WASHINGTON (Reuters) – The Bush administration on Monday expanded its bailout of the U.S. auto industry, saying it was buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion.

The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession.

The Treasury Department said it would buy $5 billion in senior preferred equity with an 8 percent dividend from GMAC as part of an effort to ensure the solvency of a company considered crucial to GM’s survival.

It also said it would lend up to $1 billion to fund GM’s purchase of equity in support of GMAC’s reorganization as a bank holding company. That loan would come on top of assistance extended to the No. 1 U.S. automaker earlier this month.

SALES DECLINES

The government agreed on December 19 to rescue GM and Chrysler LLC with up to $17.4 billion in loans to stave off a collapse that would have cost hundreds of thousands of jobs and dealt a severe blow to an economy already in recession. Of that amount, $13.4 billion was earmarked for GM.

President George W. Bush said at the time that it would be irresponsible to let the automakers die. The White House moved on its own after Republicans in the Democratic-controlled Congress blocked a deal to provide emergency funds.

U.S. auto sales have plunged to 25-year lows in recent months and are not expected to recover substantially until after 2009 under the most optimistic of outlooks. The recent steep drop in sales, which automakers and analysts have linked to the credit crisis that took hold in September, has pushed both GM and its smaller rival Chrysler LLC to the brink of collapse.

The Treasury said it was dipping into a $700 billion financial bailout fund approved by Congress in early October to buy the equity in GMAC and extend the loan to GM.

GMAC won Federal Reserve approval to become a bank holding company last week, a move intended to give it freer access to emergency government funds and help it avoid bankruptcy. GMAC has had to raise additional capital to achieve bank holding company status.

The company, co-owned by GM and private equity firm Cerberus, has lost $7.9 billion over the last five quarters as the credit crunch lifted its borrowing costs sharply and the value of many of its assets plunged.

DIVIDEND RESTRICTIONS

GMAC agreed to restrictions on dividend payments and executive pay as part of the equity injection. The bonus pool available to the top 25 executives was cut by 40 percent from 2007 levels, a Treasury official told reporters on a conference call.

GMAC said in a statement that GM and a Cerberus management affiliate have agreed to buy $1.25 billion in new GMAC shares. Previously announced separate exchange and cash tender offers have been satisfied, it said.

Representatives of GM and Cerberus could not be reached for comment.

Ford Motor Co, the other firm in Detroit’s storied Big Three, has said its liquidity was adequate for now and that it did not need a loan at this point.

GMAC has traditionally provided the bulk of financing for car buyers at GM dealerships and the floorplan financing that dealers rely on to carry inventory of GM cars and trucks.

But the finance company’s ability to provide both kinds of financing has been sharply limited over the past several months because of the broader credit crisis and as GMAC’s ability to borrow has shut down.

GM’s U.S. sales plunged 41 percent in November and the automaker cited the crunch on GMAC’s financing as contributing to the downward spiral in its sales. GM said earlier this month that while GMAC had been able to provide installment or lease financing to nearly half of GM car buyers just a year ago, that share had dropped to 6 percent now.

In 2006, Cerberus paid $7.4 billion to GM for a 51-percent stake of GMAC, which has also been hurt by its exposure to the troubled U.S. mortgage market.

(Additional reporting by Kevin Krolicki in Detroit)

(Reporting by Mark Felsenthal; Editing by Gary Hill, Leslie Gevirtz)

Copyright © 2008 Reuters Limited. All rights reserved.

Lehman bankruptcy filing wiped out billions: report [NEW YORK (Reuters)]

Lehman bankruptcy filing wiped out billions: report

Mon Dec 29, 11:59 am ET

NEW YORK (Reuters) – Lehman Brothers Holdings Inc’s emergency bankruptcy filing wiped out as much as $75 billion of potential value for creditors, The Wall Street Journal reported on Monday, citing an analysis by the bank’s restructuring advisers.

A more planned and orderly filing would have allowed Lehman to sell some assets outside of bankruptcy court protection and would have given it time to unwind derivatives positions, according to the analysis by Alvarez & Marsal.

The Journal said it was too early to say how much money Lehman creditors would recover; it said unsecured creditors have asserted they are owed $200 billion.

Lehman filed for bankruptcy protection in September after the U.S. government declined to bail it out and a frantic weekend of negotiations to save the investment bank failed.

The Lehman meltdown touched of a stock market panic and credit crisis and was quickly followed by a government rescue of American International Group Inc, once the world’s largest insurer.

Lehman’s demise also ignited a wave of fire sales of other giant financial groups such as Wachovia Corp and Merrill Lynch & Co Inc.

Lehman executives were not immediately available to comment on the Journal report.

(Reporting by Juan Lagorio, editing by John Wallace)

 

Copyright © 2008 Reuters Limited. All rights reserved.

GMAC gets Fed’s OK to become bank holding company [By Emily Kaiser Emily Kaiser, WASHINGTON (Reuters)]

GMAC gets Fed’s OK to become bank holding company

By Emily Kaiser Emily Kaiser Wed Dec 24, 6:42 pm ET

WASHINGTON (Reuters) – GMAC LLC won U.S. approval on Wednesday to become a bank holding company, giving it access to government lending programs and helping it stave off bankruptcy.

The Federal Reserve’s approval should allow GMAC to continue financing loans for General Motors Corp cars. GM Chief Executive Rick Wagoner said last week that GMAC’s difficulties were “hammering” the car maker’s ability to sell autos.

“In light of the unusual and exigent circumstances affecting the financial markets … the board has determined that emergency conditions exist that justify expeditious action on this proposal,” the Fed said in a statement.

Analysts said earlier this month that without bank holding status, GMAC could have trouble staying solvent.

But bank status comes at a cost for GMAC’s majority owner Cerberus and its minority owner GM: Both must cut their stakes in the finance company to comply with U.S. bank regulations that prevent many kinds of companies from owning too big a share of a bank.

GMAC is getting the go-ahead to become a bank holding company just days after GM and Chrysler, which is owned by Cerberus, were promised public money from the Treasury-run financial bailout fund to stave off potential bankruptcy.

GMAC has struggled as the credit crunch has lifted its borrowing costs sharply, and the value of many of its assets has plummeted. It has lost $7.9 billion over the last five quarters.

The lender’s difficulties forced it to severely curtail financing for dealerships and for consumer purchases of new GM cars and trucks in recent months. Cutting back financing compounded the sales slump at GM, the No. 1 U.S. automaker, whose sales fell an eye-popping 41 percent in November.

Although GMAC completed a $60 billion debt restructuring in June, it launched another debt exchange last month designed to help it raise capital in part through giving debtholders preferred stock.

That debt exchange has not gone as well as GMAC was aiming for. As of the middle of last week, investors had agreed to exchange 58 percent of the company’s debt, less than the 75 percent GMAC was aiming for.

But the Fed said on Wednesday that GMAC’s efforts to raise capital were “successful,” implying that the lender had managed to exchange enough bonds to meet regulators’ requirements.

A TURNING POINT

A GMAC spokeswoman called the approval a “key turning point in our 89-year history.

“GMAC believes becoming a bank holding company is the best long-term solution to provide automotive and mortgage financing to consumers and businesses, including auto dealers,” spokeswoman Gina Proia said.

Cerberus was not immediately available to comment.

A majority of GM dealers had depended on GMAC, the largest auto finance company in North America, for financing of their own inventory and consumer purchases even after GM sold a 51 percent stake in GMAC to Cerberus in 2006 for $7.4 billion. GM retains the remaining 49 percent.

GM and Cerberus will have to trim back their stakes to no more than 10 percent and 14.9 percent, respectively, to comply with Fed rules that are meant to prevent companies from using banks to fund their businesses.

Detroit-based GMAC already has a banking unit that offers certificates of deposit and online savings accounts, but becoming a bank holding company will make it eligible for government support, including guarantees of new debt that it issues and access to emergency borrowing.

The company could also apply for billions of dollars of capital under the government’s $700 billion financial rescue program, and will be able to rely on the Fed as a lender of last resort.

(Additional reporting by Dan Wilchins in New York and Soyoung Kim in Detroit; Editing by Jan Paschal and Neil Stempleman)

Copyright © 2008 Reuters Limited. All rights reserved.

Existing home sales, prices drop at record pace [WASHINGTON (Reuters)]

Existing home sales, prices drop at record pace

WASHINGTON (Reuters) – The pace of existing home sales plunged a record 8.6 percent in November and prices fell a record amount as layoffs and a stock market crash worsened an already grim housing market, a real estate trade group said Tuesday.

The median home price fell 13.2 percent on an annual basis, down for a fifth straight month to $181,300. It was the largest drop since the current data series began in 1968 and probably the largest since the Great Depression, Lawrence Yun, the chief economist for the National Association of Realtors, told reporters.

The pace of sales fell to a 4.49-million-unit annual rate.

Economists polled by Reuters were expecting home resales to set a 4.90-million pace. October’s figure was revised downwards to 4.91 million, from 4.98 million.

“The quickly deteriorating conditions in the job market, stock market and consumer confidence in October and November have knocked down home sales to another level,” Yun said.

“It is, therefore, imperative to provide incentives for homebuyers to get back into the market, Yun said.

Past experience shows when home resales slid after the 1987 and 2001 stock market crashes, they then rebounded after the third month to what had been the trend, he said.

“We hope the home sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001,” Yun said.

The inventory of existing homes for sales rose 0.1 percent to 4.203 million from 4.198 million in October. That translates into 11.2 months of supply, matching the record peak set in April, Yun said.

The housing malaise, which triggered a global financial crisis, has infected other sectors of the broader economy and sent unemployment rates higher.

Analysts says stability in the housing sector is key to any recovery in the U.S. economy, which has been in a recession since late last year.

 

Copyright © 2008 Reuters Limited. All rights reserved.

Cheney says Congress failed struggling automakers [STEPHEN OHLEMACHER, Associated Press Writer]

Cheney says Congress failed struggling automakers

By STEPHEN OHLEMACHER, Associated Press Writer Stephen Ohlemacher, Associated Press Writer 1 hr 6 mins ago

WASHINGTON – Vice President Dick Cheney blamed Congress for failing to bail out the auto industry, saying the White House was forced to step in to save U.S. car companies.

In an interview broadcast Sunday, Cheney said the economy is in such bad shape that the car companies might not have survived without the $17.4 billion in emergency loans that President George W. Bush approved on Friday.

“The president decided specifically that he wanted to try to deal with it and not preside over the collapse of the automobile industry just as he goes out of office,” Cheney said in an interview broadcast on “Fox News Sunday.”

Lawmakers “had ample opportunity to deal with this issue and they failed,” Cheney said. “The president had no choice but to step in.”

Congress rejected an auto bailout package after many Republicans and some Democrats opposed it. Some said U.S. auto companies would be better off if they were required reorganize through bankruptcy.

Cheney leaves office Jan. 20 as one of the most powerful, if unpopular, vice presidents in recent history. He played a key role in many of Bush’s major policy decisions and, in the interview, was unapologetic in his review of the past eight years.

He staunchly defended the Bush administration’s use of executive power in the fight against terrorism and disagreed with calls to limit presidential authority. “If you think about what Abraham Lincoln did during the Civil War, what FDR did during World War II. They went far beyond anything we’ve done in a global war on terror,” the vice president contended.

Cheney said he was unconcerned about polls showing him as unpopular, saying that people who spend too much time reading polls “shouldn’t serve in these jobs.”

He offered a somber assessment of the economic challenges facing the incoming Obama administration, saying there is a growing consensus that government action will be needed next year to help revive the economy. But he declined to judge the economic stimulus plan that Obama is considering because the program has yet to be announced.

Obama and his team are working to come up with details of a plan to pump up the economy with $850 billion or more in government spending over the next few years. Their goal is to create or save 3 million jobs in the next two years.

“I’d want to see what they’re going to spend it on,” Cheney said. “There usually are fairly significant differences between we Republicans and the Democrats on how you stimulate the economy.”

Cheney, also speaking about the future of the Republican Party, the hunt for Osama bin Laden, and the role for his successor, Joe Biden, said he:

_expects the Republican Party to rebound from this year’s election defeats, but is unsure whether Alaska Gov. Sarah Palin will lead the comeback as the party’s nominee for president in 2012. “I don’t think she has any kind of lock on that,” Cheney said of this year’s vice presidential candidate. “She’ll have to go out and earn it just as anybody else would have to.”

_thinks bin Laden is alive but questioned whether he is still effectively running al-Qaida. “He’s been holed up in a way where he’s not even been communicating and there are questions about whether or not he’s even running the operation,” Cheney said.

“Capturing Osama bin Laden is something we clearly would love to do” before leaving office, Cheney said. But he said it has been more important to stop terrorist attacks against the United States.

_Biden has not asked for any advice about being vice president. Biden has called Cheney “the most dangerous vice president we’ve had probably in American history.” Cheney strongly disagreed with the assertion and said he doesn’t think Obama will give Biden as consequential a role as Cheney has had under Bush.

_disagreed with the firing of Defense Secretary Donald H. Rumsfeld in late 2006, though he praised Rumsfeld’s successor, Robert Gates, who will stay on as Obama’s defense secretary. “It wasn’t my decision to make,” Cheney said of firing Rumsfeld. “The president doesn’t always take my advice.”

_did not regret using an obscenity beginning with “f” in an exchange with Sen. Patrick Leahy, D-Vt., on the Senate floor in June 2004. “I thought he merited it at the time,” Cheney said with a chuckle in the interview. “And we’ve since, I think, patched over that wound and we’re civil to one another now.”

Copyright © 2008 The Associated Press. All rights reserved.