The discussion in Washington about facilitating the merger of Chrysler and General Motors highlights the turmoil plaguing the US automobile sector. But there is also an emerging automotive finance crisis. The credit crash has triggered a precipitous decline in new car sales, caused in part by a rapid reduction in automotive financing. This in turn threatens to spark additional large write-downs in the financial sector. Rather than allow this systemic risk to spread through our entire economy, the Federal Reserve should move quickly to draw on past practice and create a conservative, well-established financing body that can bring relief to the auto finance sector, before it is too late.

The automotive industry is the largest manufacturing industry in the US. It accounts for an estimated 20 per cent of all US manufacturing gross domestic product, more than 1m jobs and an estimated 4m-6m additional jobs on an indirect basis. It is a cornerstone of the US economy.