Green Tech

President Barack Obama on Monday said U.S. automakers General Motors and Chrysler will require further restructuring to receive additional government aid.

In a press conference at the White House, Obama, flanked by members of his Cabinet, detailed the measures the administration is imposing on the struggling companies following the evaluation of his auto industry task force.

President Obama announces initial findings of the government's auto industry task force.

(Credit: Screen capture by Martin LaMonica/CNET)

The U.S. government will give GM working capital for 60 days but has demanded additional concessions from GM bondholders, union workers, and management. Rick Wagoner was asked to step aside as CEO and will be replaced by Frederick "Fritz" Henderson.

In its evaluation, the U.S. government found Chrysler less financially viable. An additional $6 billion loan is contingent on Chrysler striking a partnership with Fiat or another automaker in the next 30 days.

In his comments, Obama made clear that the administration considers fuel-efficient vehicles integral to revitalizing U.S. automakers.

"I am absolutely committed to working with Congress and the auto companies to meet one goal: the United States of America will lead the world in building the next generation of clean cars," Obama said. He noted that many American-made car companies, including GM, have made significant advances in producing fuel-efficient cars.

The administration determined that bankruptcy is one possible way to restructure GM quickly, although Obama said he opposes a drawn-out legal proceeding or dismantling the company. "What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down," he said.

Updated at 12:20 p.m. PDT with information from president's auto industry task force report on GM.

Following a review of the ailing U.S. automakers, the Obama administration has ousted General Motors CEO Rick Wagoner and has withheld more loans to Chrysler, according to reports.

On Monday, General Motors put out a statement that Wagoner was asked to "step aside" as CEO of GM. Chief Operating Officer Frederick "Fritz" Henderson is now CEO, and changes to GM's board of directors are expected.

(Credit: Martin LaMonica/CNET)

The restructuring plan for GM has four elements: sustainable profit, healthy balance sheet, more aggressive operational restructuring, and technology leadership, according to the GMBlogs Twitter account, which is run by GM communications professionals.

Obama administration officials are expected to provide an update on the auto industry rescue plan on Monday but are demanding concessions before releasing any of the $21.6 billion that GM and Chrysler are requesting in additional loans, according to an article in the The Wall Street Journal.

The federal government could recommend that GM enter into bankruptcy, according to the article. Chrysler is considered more precarious financially: $6 billion in additional loans are contingent on the automaker forging an alliance with Fiat in 30 days.

For GM, it's not clear how a more dramatic restructuring program will influence the company's technology development programs, including investments in fuel-efficient cars and plug-in electric vehicles.

At a recent briefing on GM's Chevy Volt electric sedan, executives said the program continues to be on track and that the company continues to devote resources to it.

The Chevy Volt, which runs 40 miles on a battery pack and draws on a gasoline engine for longer trips, is still scheduled for delivery in late 2010. But the sedan will have lots of competition from an anticipated wave of all-electric and gas-electric sedans coming from large automakers and start-ups in the next two years.

In its assessment of GM, the president's auto industry task force said that the company was at least one generation behind Toyota in "green" powertrain development.

"In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable," according to the report. (Click for PDF).

The report also concluded that GM relies too heavily on high-margin SUV and truck sales and that the company is more vulnerable than competitors to increases in the CAFE fleet fuel-efficiency standards.

"Many of its products fail to meet the minimum threshold on fuel economy and rank in the bottom quartile of fuel economy achievement," according to the report.

The federal government will make billions of dollars worth of loans available to U.S. automakers to enable them to restructure and invest in fuel-efficient auto technologies like electric vehicles.

At a press briefing on Friday, President Bush announced the outlines of the plan which he said was meant to avoid a "disorderly bankruptcy."

Auto companies will have access to $13.4 billion from the $700 billion that was authorized to shore up the country's financial institutions. Another $4 billion would become available for the carmakers in February. The companies have until March 31 to demonstrate that they have plans to be "viable companies" or the loans will be called back.

The deal also requires the automakers to give the government loans priority over other creditors, limits on executive pay and elimination of perks like corporate jets.

Bush said that the terms of the loans will be similar to the ones that Congress nearly passed last week. At the last moment, a disagreement over the timetable for bringing U.S. workers wages in line with foreign competitors derailed weeks of talks.

Because Congress failed to pass that measure, Bush said the executive branch has stepped in and tapped the funds available in the Troubled Asset Relief Program (TARP). He said that all parties--auto companies, unions, creditors, and suppliers--will need to make significant concessions.

"Given the situation, it is the most effective and responsible way to address this challenge facing the nation," Bush said. "We will shield the American people from a harsh economic blow at a vulnerable time and give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination."

Tech investments
General Motors and Chrysler are expected to take out the loans because they are considered financially vulnerable and said to be close to running out of cash.

Ford, meanwhile, has said the loans are necessary because a failure of other large car companies would disrupt its own operations and suppliers.

With the cash lifeline, these companies should be able to pursue the business plans they presented to Congress to regain financial footing.

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Their product plans calls for investments in fuel-efficient vehicles, including electric powertrains. The Big 3 have all announced plans to make gas-electric cars which will bring a jump in fuel efficiency.

On Wednesday, General Motors said that it has delayed construction of a new plant to manufacture an engine for the Chevy Volt and Cruze, another highly touted fuel-efficient car. A company representative said that plans were on hold temporarily because GM is cutting back expenses.

In a statement, Chrysler CEO Bob Nardelli said that the company is committed to "meeting these requirements."

Material from CBSNews.com was used in this report.

A federal assistance package to forestall a deeper financial crisis at U.S. auto giants ran out of gas in the Senate late on Thursday, giving the stock market a downward shock.

After passing the House and getting White House agreement, the Senate failed to get the 60 necessary votes to continue debate on the auto rescue bill.

General Motors and Chrysler, which have said they need billions of dollars in federal aid to continue operations, released statements saying they were disappointed with the Senate's vote. Ford lobbied for the aid because it said it would suffer damage from the failure of the other large manufacturers or suppliers. All are suffering from a sharp drop in sales.

Automakers are expected to lobby the White House to tap the Troubled Asset Relief Program (TARP) emergency aid, which was established to shore up U.S. financial institutions.

The talks in the Senate broke down at the last minute over Republican Senators' insistence to have labor rates put on "parity pay" with non-labor employees at foreign car makers, according to reports.

"We are about three words away from a deal," said Senator Bob Corker, who had proposed that wages be brought in line in 2009.

Impact on tech investment?
Apart from questions over the size of the loans and oversight, U.S. automakers were expected to invest in technologies to improve fuel efficiency, such as plug-in electric cars.

In its business plan presented to Congress, GM pledged to "substantially change its product mix over the next four years, and launch predominately high-mileage, energy-efficient cars and crossovers."

It also said that GM's car fleet efficiency would be 37.3 miles per gallon by 2012--apparently higher than the mandated standards--and would invest heavily in electric car powertrains.

Similarly, Ford said that it would accelerate delivery of a line of battery-powered cars.

The failure of the deal now raises the possibility of financial breakdown at GM and Chrysler, which have said that they need "bridge loans" to get through the end of the year.

Public opinion, meanwhile, shows wariness of any financial assistance to the auto companies. A poll from the nonpartisan Pew Research Center found that only 39 percent of people surveyed said that it would be right to spend billions to keep the Big Three in business, according to news reports.

Some economist have argued that allowing the auto companies to collapse would cause far greater economic damage than the size of the bailout.

President-elect Barack Obama on Saturday said that building energy efficiency is central to his administration's economic recovery plan and outlined the conditions he intends to impose on ailing U.S. automakers.

In his weekly radio address, which is broadcast on YouTube, Obama laid out the planks a government-led spending program meant to revitalize the U.S. economy and create jobs.

"First, we will launch a massive effort to make public buildings more energy-efficient. Our government now pays the highest energy bill in the world. We need to change that. We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs," he said in his radio address.

He also pledged to make federal money available to rebuild roads, upgrade schools to be energy efficient, and expand broadband access to schoolchildren.

The energy plan is expected to include a commitment to upgrade the electricity distribution infrastructure. By equipping the grid with communications network--the essence of smart grid technology--utilities can run the power grid more efficiently and consumers can get information to help lower energy usage.

An aide told the The New York Times that the green collar portion of the stimulus plan could be $100 billion over two years.

Following his radio address, Obama taped an interview which aired on Sunday's edition of Meet the Press.

In response to questions about the plight of U.S. automakers, Obama said that he does not want to allow the financially strapped corporations to collapse because they are the backbone of the manufacturing industry.

However, he said that any federal assistance will come at the price of "significant adjustments from all their stakeholders." He said his advisers are devising ways to keep automakers "feet to the fire," as a bankruptcy court does, to reflect the urgency of change.

"You have seen some progress made incrementally in many of these companies...They are making some investments in the kind of green technologies and new batteries that will let them make plug-in hybrids," Obama said. "What we haven't seen is the sense of urgency and willingness to make tough decisions."

Ford Motor made electric vehicles a centerpiece of a turnaround plan presented to Congress on Tuesday, saying that it will introduce an all-electric van for fleet use in 2010 and a sedan in 2011.

The Big Three U.S. automakers are scheduled to return to Washington, D.C., this week with the hopes of negotiating loans to forestall a collapse from lack of cash.

All three companies are seeing a continued dip in sales, but Ford is considered far better off financially than General Motors and Chrysler. Ford on Tuesday said it could be cash-flow positive from operations by 2011, but it is still requesting up to $9 billion in loans, which CEO Alan Mulally said will act as a "critical backstop or safeguard against worsening conditions, as we drive transformational change in our company."

The business plan lists cost reductions--including plant closings and the sale of its much-criticized corporate aircraft--and investments in smaller, fuel-efficient cars and a line of electric vehicles.

Its product plans calls for:

• A commitment to improve fuel efficiency across its fleet: 14 percent for 2009, 26 percent for 2012, and 36 percent for 2015--all compared with 2005 overall fleet mileage.

• At the North American International Auto Show, Ford will discuss its "vehicle electrification plan." That will include a family of hybrids, plug-in hybrids, and all-electric, or "battery electric," vehicles scheduled to debut in 2012.

Its first product will be a van-type vehicle for commercial fleets in 2010 and a sedan in 2011 with a goal of making battery-powered cars cost-effective. The cost of batteries make plug-in hybrid or all-electric vehicles significantly more expensive than gasoline engine cars.

Ford said that it will work with unnamed battery and electric-vehicle powertrain providers to bring its electric cars to market.

The company said that it intends to invest $14 billion in efficiency and it will introduce in cars its EcoBoost technology, which it unveiled at last year's North American International Auto Show.

The company also said that it is exploring the sale of its Volvo car division.

The anxious auto and clean-energy industries have received positive signals from President-elect Barack Obama in the past two days.

In an interview with 60 Minutes broadcast on Sunday, Obama said he intends to pursue a government stimulus package that includes investments to promote clean technologies, even though oil prices have fallen dramatically during 2008.

Interviewer Steve Kroft asked whether cutting oil imports was less important now that the price of oil has plummeted from $147 a barrel earlier this year to under $60.

Obama: It's more important. It may be a little harder politically, but it's more important.

Kroft: Why?

Obama: Well, because this has been our pattern. We go from shock to trance. You know, oil prices go up, gas prices at the pump go up, everybody goes into a flurry of activity. And then the prices go back down and suddenly we act like it's not important, and we start, you know filling up our SUVs again.

And, as a consequence, we never make any progress. It's part of the addiction, all right. That has to be broken. Now is the time to break it.

Obama said a consensus exists among policymakers that a stimulus package is required to prop up the deteriorating economy.

Addressing the question of a bailout for cash-strapped U.S. automakers, Obama said that giving them government money with conditions is the best policy.

He said that allowing the U.S. automakers to collapse would be a disaster but that handing them a blank check won't solve the problem. Instead, he said that the various stakeholders need to come up with a plan for a "sustainable auto industry." From the interview:

So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan (for) what does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere."

Meanwhile, in his weekly radio address on Saturday that was broadcast as a video online, Obama reaffirmed his plans for long-term investments on green energy.

"It means investing $150 billion to build an American green-energy economy that will create 5 million new jobs while freeing our nation from the tyranny of foreign oil and saving our planet for our children," Obama said.

Energy and environmental policy were certainly not the top topic of the president-elect's public statements, given the pressing nature of the economic crisis and executing the transition between administrations.

But Obama's recent statements, as well as those from his advisers, indicate that energy remains a high priority. The idea is that an energy policy focused on clean technologies can address environmental problems while stimulating the economy.

"The president-elect will move quickly on climate change," Jason Grumet, a high-level Obama campaign's lead energy and environment adviser, told a conference on carbon trading last week.

In addition to spending on energy infrastructure, Obama's energy plan calls for incentives for energy efficiency, a national renewable energy mandate for utilities, a low-carbon biofuels standard, and a cap-and-trade system for reducing greenhouse gas emissions.

The massive U.S. financial bailout plan, signed into law Friday afternoon, renews existing tax credits for renewable energy and includes rebates for plug-in hybrid drivers.

Representatives from the wind and solar industries have lobbied for months to extend the credits to ensure continued growth. Without the supports in place, they warned business would stall, resulting in thousands of lost jobs.

In addition to the renewable energy "extenders," the law boosts subsidies to invest in non-conventional fossil fuels--so-called dirty fuels, such as making liquid fuel from coal or sand and rock. Also included are breaks to develop technologies to burn coal more cleanly and to sequester carbon dioxide emissions from coal plants underground.

Important to the clean-tech industry is $800 million in available bonds for renewable energy generation facilities from renewable sources, such as biomass and geothermal.

The biggest impact in renewable energy will be in solar, for both residential customers and larger businesses. For solar, the law:

• Extends for eight years the 30 percent tax credit for solar residential and commercial solar installations.

• Eliminates the $2,000 cap on that tax credit for solar electric panels installed after the end of this year.

• Allows utilities to benefit from these tax credits.

These changes make solar a far more attractive investment, particularly for consumers in states with good sun and supportive state policies.

Research firm New Energy Finance, in a note to clients on Saturday, said that the payback time for a typical solar panel installation will go from from 10 years to 7 years in California and from 15 years to 12 years in Florida.

Wind industry subsidies, called a production tax credit, were extended for one year, a policy which doesn't disrupt ongoing wind projects but falls short of the long-term footing the industry was seeking.

New Energy Finance called the wind power extension a "good patch" but not enough to spur manufacturers to expand capacity.

The existing production tax credit for large-scale geothermal and biomass projects were extended for two years.

For small wind turbines under 100 kilowatts, the federal government will now give a tax credit of up to $4,000 for the next eight years.

Residential geothermal heat pumps have a $2,000 tax credit. And credits for marine power systems were extended eight years as well.

In a statement, Rhone Resch, the president of the Solar Energy Industry Association (SEIA), said that "this bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America's energy future."

He said that by 2016, solar energy will be the least expensive source of electricity for consumers.

"By passing this bill, Congress has finally given the solar energy industry 'policy certainty' that will attract investment, expand manufacturing, and lower the cost of solar energy to consumers," Roger Efird, SEIA chairman and president of Suntech America, said in a statement.

Similarly, the American Wind Energy Association on Friday put out a statement lauding politicians for maintaining a policy in place. Previous, renewable energy tax credits have lapsed and delayed growth of the industry.

Transportation and efficiency
The law will give drivers of plug-in hybrid vehicles a tax credit between $2,500 and $7,500, depending on the capacity of the battery. Larger vehicles, such as trucks, have larger credits.

"The new tax credits for plug-in cars are higher than either presidential candidate has proposed. Now automakers and car buyers will no longer see higher up-front costs as a showstopper," Felix Kramer, founder, the California Cars Initiative, said in a statement. "And with this legislation, we'll also get more wind and solar energy that will make plug-in cars drive cleaner every year they're on the road."

Also in the fuels arena, the law extends the alternative fuels tax credits and extends for one year the existing $1 per gallon credit for biodiesel and renewable diesel production. That's good news for biodiesel producers, some of which are struggling because of rising feedstock prices.

Energy efficiency gets a nod as well with measures, such as rebates for appliances and bonds available to building operators that decrease building energy usage by 20 percent.

"Overall, the legislation's passage represents good news for clean energy projects and firms which, like the rest of the economy, rely on access to capital from banks and other financial institutions," New Energy Finance said in its note.

Updated on October 4 6:30 a.m. PDT with more details and analyst comments.

Last week, the Bush administration proposed a three-page bill to bail out Wall Street to the tune of $700 billion. It died in the U.S. House of Representatives earlier this week.

On Friday, though, the House approved a far bigger, broader, and beefier version of the bill--which has ballooned to a remarkable 442 pages. The vote was 263 to 171, with the bulk of the opposition coming from Republicans. Because the Senate already approved the measure, it immediately went to President Bush, who signed it into law.

On the theory that this would be a way to convince previously skeptical Democrats to approve the measure, one large chunk of the bailout bill is devoted to renewable energy, energy-efficient appliances, and so on (the "Energy Improvement and Extension Act of 2008"). The authors lured Republicans with protections from the alternative minimum tax (via the "Tax Extenders and Alternative Minimum Tax Relief Act of 2008").

That includes, as the New York Post pointed out, millions in tax breaks and related pork for kids' wooden arrows, Puerto Rican rum producers, auto race tracks, and corporations operating in American Samoa. (The likely explanation for the latter: StarKist has a large tuna-canning operation in American Samoa. And StarKist's parent company happens to be located in the district of House Speaker Nancy Pelosi.)

The bill has become, in other words, something almost unrelated to the business of bailing out Wall Street. The Beltway term for this is a "Christmas tree bill," meaning everyone gets to hang their favorite spending projects on it--though by the time Congress gets it through, it more closely resembles a slop bucket.

"We will not Christmas-tree this bill," Sen. Chuck Schumer, a New York Democrat promised a few days ago. "The times are too urgent. Everyone has their own desires and needs. It's going to have to wait."

So much for that idea.

Here's a look a some of the green-tech measures:

• One-year extension for wind and refined coal energy tax credits. A production credit for electricity produced from renewable marine energy sources (meaning through wave power and river power, or by exploiting the differences in ocean temperature). Energy credits for "small wind properties," geothermal heat pump systems, and energy-efficient residential properties.

• New renewable-energy bonds. Up to $800 billion in energy bonds may be offered to the public, with a third from "public power providers," a third from governments, and the remainder from "cooperative electric companies."

• Tax credits for "cellulosic biofuels" and for "carbon dioxide sequestration." An extension of an alternative fuel credit. Tax credits for "new qualified plug-in electric-drive motor vehicles." Bicycle commuters get a nod, as do regulations aimed at "residential top-loading clothes washers."

IRS undercover operations: Privacy invasion?
The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, "I'm not sure if that deduction is entirely legal, but it'll save you $1,000. Want to take it?") That section had expired as of January 1, 2008, and would now be renewed.

Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 "trained undercover agents" working in field offices at the time. This is the first time that such undercover authority would be made permanent.

Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: "Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year."

There's another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected "terrorist" activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.

The information that can be shared includes "a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return."

That provision had already existed in federal law and automatically expired on January 1, 2008.

What's a little odd is that there's been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: "I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy." He never mentioned the necessity of additional IRS undercover operations.

The bailout: Details, controversy, and loopholes
As my colleagues over at CBSNews.com reported on Friday, the law authorizes the Treasury Department to create a so-called Troubled Assets Relief Program, or TARP, as well as a separate insurance fund.

The TARP program permits the Treasury to purchase mortgage-backed bonds or any other "troubled assets" from financial institutions. The idea is that because banks have become so hesitant to lend to each other, this law will help unstick the gears of the modern financial economy.

Some loopholes exist. It's possible for a bank to buy $100 billion of bad debt--perhaps in the form of subprime mortgages that are becoming quickly worthless-- declare bankruptcy, and sell it to the Treasury Department for $120 billion, or $200 billion. In other words, although the Treasury Department is supposed to look out for the best interests of taxpayers, there's no law forbidding such profits in the case of firms involved in bankruptcy, receivership, or mergers.

The Treasury Department is authorized to "guarantee" home mortgages, essentially becoming a kind of co-signer, to reduce the number of foreclosures. If the home owner stops paying his or her mortgage, taxpayers would be on the hook. The Treasury Department can also eliminate a "reasonable" amount of a home owner's mortgage debt, under section 109 of the new law, which would likely delay the process of house prices falling.

In response to grassroots pressure from Americans upset about Wall Street executives cashing in, Section 111 is titled "Executive Compensation and Corporate Governance."

It does not include, however, any statutory dollar limit on how high executive salaries of TARP bailout recipients can be. Instead, it lets Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, come up with "appropriate standards." In addition, only the top five executives will have their golden parachutes limited; all the rest will remain untouched, even if their second-tier salaries and bonuses happen to be in the millions or tens of millions of dollars.

Bear Stearns CEO James Cayne made $61.3 million from selling his shares a day after the JP Morgan bailout. Daniel Mudd, CEO of Fannie Mae, was replaced last month; he made $11.6 million in 2007. Richard Syron was chairman and CEO of Freddie Mac from 2003 until last month. He made $19.8 million last year. Martin Sullivan was ousted as president and CEO of AIG this summer, and was paid a $47 million severance package.

While salaries of failed executives will have no statutory limit, TARP-participating companies will lose a tax deduction if they pay their top executives more than $500,000 a year. The $500,000 limit only kicks in if the company offloads over $300 million in assets through TARP.

Section 115 of the law says that the administration can, after notifying Congress and waiting 15 days, purchase and hold $700 billion of assets "at any one time." (It can buy and hold $350 billion without waiting.)

This, too, is a potential loophole. It permits the Treasury Department to buy up, say, $700 billion in 2008, sell those assets off gradually over the next year at a (probable) loss, and repeat the same process in 2009. Losses to taxpayers, in other words, could exceed $700 billion. Although the Treasury Department is instructed to try to avoid losses, the text of the law does not forbid that scenario.

If the TARP ends up costing taxpayers money, the president may ask Congress to consider enacting a law to recoup "from the financial industry an amount equal to the shortfall," presumably through higher taxes. But Congress is under no obligation to do anything; a mechanism to cover the shortfall does not exist in this law.

Even though FDIC coverage will be boosted from $100,000 to $250,000 per account through December 2009, premiums to banks may not take "into account" the higher account coverage. In other words, premiums can't increase for that reason.

Also:

•  This may be just the beginning of bailouts. California Gov. Arnold Schwarzenegger said Thursday that the state may need a $7 billion loan from the U.S. Treasury, according to a report in the Los Angeles Times. That's because the state has spent more than it takes in through tax revenue, with an annual budget deficit of $14 billion or more, even though its individual income tax rate is arguably the highest in the nation.

•  CBS News' John Bentley reports from Arizona that Republican presidential candidate John McCain is taking some credit for the bailout's passage: "I'm glad I suspended my campaign and went back to Washington to bring, and help bring, House Republicans to the table," he said on Friday. Democratic presidential candidate Barack Obama described the law as "absolutely necessary to prevent an economic catastrophe."

•  Rep. Ron Paul of Texas, who correctly predicted in 2003 that taxpayers would be "forced to bail out investors," said in a speech on the House floor that the legislation would "only further harm the economy" and was actually worse than the previous version. In a CNN interview, the former Republican presidential candidate said his colleagues are refusing to deal with the underlying problems and spending more tax dollars even though "this country's bankrupt."

•  The Dow Jones Industrial Average (-22 percent year-to-date) and the Nasdaq composite index (-27 percent) closed on Friday down 1.5 percent, despite the bailout. Gold ended at $834.80 an ounce, slightly up for the day and the year. Crude oil futures ended at $93.88 a barrel, slightly down for the day.

•  U.S. jobs fell by 159,000, a decline of 760,000 this year. Technology firms have also contemplated hiring freezes and some, including Hewlett-Packard and Dell, have already laid off employees, as my colleague Ina Fried reports in a separate article.

Updated at 10:40 a.m. PDT to reflect the House of Representatives' approval of the bill.

Updated at 3:30 p.m. PDT to add more details.