Obama seeks stimulus as jobs die, carmakers bleed

NEW YORK Fri Nov 7, 2008 5:58pm EST

1 of 12. Britain's Prime Minister Gordon Brown arrives at the start of European Union leaders summit in Brussels, November 7, 2008.

Credit: Reuters/Yves Herman

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NEW YORK (Reuters) - President-elect Barack Obama called for urgent passage of a stimulus package to reinvigorate a faltering economy that saw unemployment hit a 14-year high on Friday while U.S. automakers reported billions in losses.

European Union leaders also met in Brussels ahead of a global summit in Washington next week, and French President Nicolas Sarkozy said they were united on an aggressive plan to reform the global financial system.

Obama addressed reporters after meeting with a team of economic advisers who are preparing him to take office on January 20 amid the world's worst financial crisis since the 1930s Great Depression.

"By calling this press conference he is sending a strong message that he is already on the job," said Greg Salvaggio, senior currency trader at Tempus Consulting in Washington. "He is showing he will be ready to hit the ground running."

The U.S. unemployment rate shot up to 6.5 percent in October, its highest level since March 1994, as another 240,000 nonfarm jobs were lost in October, raising the number of lost jobs for the year to 1.2 million.

"I want to see a stimulus package sooner rather than later. If it does not get done in the lame-duck session, it will be the first thing I get done as president of the United States," Obama said, referring to the period when the outgoing Congress meets between now and the end of the year.

Obama also called on President George W. Bush to join Congress in seeking aid for the ailing U.S. auto industry, which was seeking some $50 billion in emergency loans.

Ford and GM combined burned through $14.6 billion of cash in the third quarter while racking up $7.2 billion in operating losses.

GM shares tumbled more than 16 percent and Ford 7 percent before recovering. GM closed down 9 percent and Ford gained 2 percent to $2.02.

The broader market bounced back from a 10 percent loss over the previous two days with the Dow and the S&P 500 both closing 2.9 percent higher as the job figures, though bad, were not as devastating as some in the financial markets expected.

The Dow's 4.09 percent drop this week marks the worst presidential election week for the blue chips since Harry Truman upset Thomas Dewey in 1948.

"The very fact that stocks are up at all today is pretty remarkable in light of the news from General Motors and the labor market. I think people are going to give him (Obama) the benefit of the doubt," said David Gilmore, a partner at FX Analytics.

EYES ON OBAMA

Obama made no announcement on his choice for Treasury secretary -- the person who will administer the $700 billion program to buy toxic debt and recapitalize financial institutions.

While Bush remains in power, the Treasury Department will consider all options for the rescue plan, including extending it to areas of the financial sector beyond traditional banks, a senior Treasury official said.

The man running the program, Neel Kashkari, said it had brought some relief to credit markets but conditions remain vulnerable and more work needs to be done.

Benchmark London interbank rates, or Libor, fell for the 20th straight day, with three-month rates hitting their lowest since May 2004 and overnight rates the lowest since February 2004.

Governments around the world have pumped trillions of dollars into saving the afflicted financial sector, which was hurt by bad debts in the U.S. housing sector that spread throughout the system because so much was riding on mortgage- and other asset-backed securities.

"We want to change the rules of the game in the financial world," Sarkozy said, adding that EU leaders backed a five-point French plan including a stronger role for the International Monetary Fund (IMF), surveillance of credit ratings agencies and caps on excessive risk-taking.

Central banks have stopped worrying about inflation and are reducing borrowing costs to try to prevent the global financial crisis from turning into a deep downturn.

South Korea lowered interest rates by 25 basis points, its third cut in a month, after a deep rate cut by Britain and one by the European Central Bank on Thursday.

(Reporting by Reuters bureaus worldwide; Editing by Steve Orlofsky, Brian Moss, Gary Hill)

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