How far will World Governments go to save their economies and industry when we see the US Democratic Party working on a $25 billion (£17 billion) car industry rescue plan.

The democratic party are discussing a rescue plan for US car-makers at a time when US Treasury Secretary Henry Paulson is re-thinking his $700 billion (£476 billion) bank bail-out plan. Mr Paulson has said that instead of buying up the banks’ toxic mortgage debts, the US Treasury will instead focus on taking stakes in banks, which is similar to the route taken by the UK government’s rescue package.

Car-makers Ford (Sales down 30%, $2.98 billion third-quarter loss), General Motors (Sales down by 45%, $4.2 billion third-quarter loss, plus 5,400 job cuts) and Chrysler (Sales down by 35%) are companies that have seen huge falls in sales over recent months amid the credit crisis. These falls in sales have prompted this plan with a vote to be made as early as next week on a bill to introduce the rescue.

Pressure has come from many directions, one of which being the union leaders, warning of the dire consequences for the US economy if one of the big three car manufacturers goes broke.

So where will these rescues end? With both the banking and insurance sectors already having benefited from rescue deals and now the car industry presently being considered. All of this renders the whole “capital market” system obsolete and it makes a mockery of the “Free Market” system.

US Federal Reserve chief Ben Bernanke has urged politicians to “act quickly” to support the proposed $700bn (£378bn) bail-out of the financial markets.

He added the US economy risked “serious consequences” if action was not taken.

Treasury Secretary Henry Paulson told Congress that the proposal was about “benefitting the American people”.

Meanwhile, presidential candidate John McCain said he felt the bail-out would not be approved, and was suspending his campaign to help find a solution.

“It has become clear that no consensus has developed to support the administration’s proposal and I do not believe that the plan on the table will pass as it currently stands,” he said.

“Action by Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy” Ben Bernanke Chairman, Federal Reserve

And President George W Bush is to give a primetime televised address to convince US citizens of the need for the proposed rescue.

The top officials have been making the case for the bail-out, arguing that failure to act would unleash what some have called “catastrophe”.

And billionaire investor Warren Buffett said the rescue plan was “absolutely necessary” to help pull the financial system out of an “economic Pearl Harbor”.

‘Work together’

Both Democrat and Republican politicians have expressed strong scepticism about the proposal, under which a federal fund could buy bad debt from financial institutions with “significant operations in the US”.

The fund would aim to sell off these mortgage-related debts in the future when, the Treasury says, their value might have risen.

Congressmen from both sides said they wanted assurances that the plan would benefit ordinary American home-owners as well as Wall Street.

Some have gone further, calling the plan a potential waste of public money.

Mr Paulson told the House Financial Services Committee that the entire proposal was about “benefitting the American people, because today’s fragile financial system puts their economic well-being at risk”.

And he said that there was a good chance that – when the assets bought by government were resold, much of, or perhaps even all, of the $700bn could be recouped.

“The program we have proposed is not a spending program. It is an asset purchase program, and the assets which are bought and held will ultimately be resold with the proceeds coming back to the government,” Mr Paulson said.

‘Substantial challenges’

Meanwhile Mr Bernanke said that for the economy to pick up required a “return to more normal functioning” of the financial system – allowing credit to flow and giving a boost to the housing sector.

“Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress.

“Action by Congress is urgently required to stabilise the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy.”

He added that the US economy continued to face substantial challenges, including a weakening labour market and elevated inflation.

“Notably, stresses in financial markets have been high and have recently intensified significantly,” he said.

“If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse.”

News reported by The BBC