FDIC to guarantee $1.4 trillion in bank debt

While the FDIC threw a blanket of guarantees over the nation's banks, President George W. Bush ensured that millions of laid-off workers will keep getting their unemployment checks as the year-end holidays approach. Bush signed an extension of jobless benefits into law just before 8 a.m., as he was preparing to leave the White House for a morning flight to Lima, Peru, to attend the 21-nation Asia-Pacific Economic Cooperation forum.

About 1.2 million people would exhaust their unemployment insurance by the end of the year without the extension, sponsors said. The measure is estimated to cost about $5.7 billion, although economists put the positive impact at $1.64 for every dollar spent on jobless benefits because the money helps sustain other jobs and restores consumer confidence.

The legislation provides seven additional weeks of payments to people who have exhausted their benefits or will exhaust them soon. Those in states where the unemployment rate is above 6 percent will be entitled to an additional 13 weeks above the 26 weeks of regular benefits. Benefit checks average about $300 a week nationwide.

The benefits provided would be in addition to 13 weeks of federally funded extended benefits Congress approved last June.

Still, a Federal Reserve official warned Friday that the economy's weakness will stretch well into next year. "We likely are in for a protracted period of poor economic performance," said Charles Evans, president of the Federal Reserve Bank of Chicago.

Many analysts believe the economy will continue to shrink through the rest of this year and into the next, more than meeting a classic definition of recession.

Investors were discouraged earlier this week by the inability of the White House and Congress to agree on a plan to provide relief to the battered auto industry.

Democrats had sought to carve out $25 billion from the $700 billion financial rescue plan to keep the auto industry in business through next spring, but the White House and Senate Republicans objected.

The heads of General Motors Corp., Ford Motor Co. and Chrysler LLC warned that automakers are perilously low on cash. In a letter to the auto executives released Friday afternoon, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid demanded a detailed accounting by Dec. 2 of the companies' financial condition and short-term cash needs, as well as how they would achieve long-term viability.

Hearings are expected the week after next and lawmakers could consider legislation during the week of Dec. 8, but only if the industry shows that taxpayers and auto workers would be protected, congressional leaders said.

Other federal actions to resuscitate an economy crippled by home foreclosures, a credit freeze and confusion in financial markets will probably have to wait until January.

Obama has pledged to make economic recovery the immediate focus of his new administration, and both the House and Senate will have increased Democratic majorities eager to support him.

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