Don't expect Wall Street's turmoil to ebb in the year's last full week of trading as investors face questions about an auto bailout, the banking crisis, and the Federal Reserve's final rate-setting meeting of 2008.

The market, still hovering at decade lows, has yet to show any sign of a traditional year-end rally. And the next few days it will face a number of tests that could determine if investors are able to get past all the negative economic news to end the year on a bright note.

The fate of Detroit's three biggest automakers continues to be in question this week after the Senate failed to pass a $14 billion bailout for the Chrysler LLC and General Motors Corp. Ford Motor Co. has said in the past that it does not need government money to survive.

The White House this week is expected to unveil ways to provide emergency aid to the automakers, which have said they could run out of cash within weeks without government help. Many expect that the Bush administration will use money from the $700 billion financial bailout fund to provide loans to the carmakers.

"If the administration had some notion that this was a house of cards, that this was going to bring the entire economy down, then they have the authority to write checks out of the already passed bailout program," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

On Sunday evening, major stock indexes were modestly higher in futures trading. Dow Jones industrial average futures rose 49 points, or 0.56 percent, to 8,738. Standard & Poor's 500 index futures added 5.00, or 0.56 percent, to 891.00; while Nasdaq-100 futures rose 7.25, or 0.60 percent, to 1,220.75.

That might add to Wall Street's resilient performance on Friday after it rebounded from an early sell-off to end higher after the government said it would assist troubled U.S. automakers. The Dow rose 0.75 percent, and ended the week with a loss of just 0.07 percent.

The S&P 500 rose 0.42 percent last week, while the Nasdaq advanced 2.08 percent. For the year, the Dow is down 34.9 percent, the S&P 500 is down 40.1 percent and the Nasdaq is off 41.9 percent.

"The market's been pretty resilient," said Matt King, chief investment officer of Bell Investment Advisors. "The bad news keeps coming out ... but the market's been holding firm and making some good gains. So to us that's a good sign."

Along with uncertainty about the auto sector, the Fed's policy meeting on Monday and Tuesday will also remain in focus. The central bank is expected to lower its benchmark fed funds rate by a half-percentage point to 0.5 percent.

But, with rates so low, that means the Fed will soon run out of room to lower interest rates further to stimulate the economy.

Goldman Sachs Group Inc. and Morgan Stanley, the two biggest U.S. investment banks, will report results this week.

Analysts expect Goldman on Tuesday will report its first loss since becoming a public company in 1999. Morgan Stanley is also expected to report a loss during the fourth quarter.

Investors will also pore over economic reports, including Tuesday's release of the government's Consumer Price Index for November and housing starts.

Wall Street had a strong start to the week, after President-elect Barack Obama outlined his economic stimulus plans and indications that Congress will help Detroit's automakers stave off bankruptcy.

Over the weekend, Obama outlined plans to invest in infrastructure, energy and construction projects to spur the U.S. economy out of its year-long recession and create jobs. The proposals came after the Labor Department said the economy shed 533,000 jobs in November.

The major averages started the day higher, as the Dow Jones industrial average gained 269 points, or 3.1%, to 8,904, shortly into the session. The Standard & Poor's 500 was up 31 points, or 3.5%, to 907, while the Nasdaq added 43 points, or 2.9%, to 1,553.

According to TradeTheNews.com, Democrats in Congress and the Bush administration have agreed to the framework of a deal that provide loans to General Motors (nyse: GM - news - people ), Ford Motor (nyse: F - news - people ) and Chrysler, but not nearly the $34.0 billion the companies requested. Rather, the package is believed to be worth around $15.0 billion, and would help GM and Chrysler hold off bankruptcy until at least March, but may require management change. Shares of GM climbed 62 cents, or 15.2%, to $4.70 early Monday, while Ford gained 31 cents, or 11.4%, to $3.03. (See "Promises Of Rescue Come With Demands For Change.")

Still, the news out of corporate America was not all good over the weekend and Monday morning. More job cuts are on the way, from companies like 3M (nyse: MMM - news - people ) and Dow Chemical (nyse: DOW - news - people ).

3M announced over the weekend that it would cut 1,800 jobs in the fourth quarter, and on Monday morning the diversified company cut its 2008 earnings guidance to reflect the global economic slowdown. Shares of the Dow component were up 22 cents, or 0.4%, to $60.07, during the broad rally early Monday.

Dow Chemical said it will lay off 5,000 workers and close 20 plants in "high-cost" locations as part of its accelerated restructuring plans. The news sent Dow shares up $1.03, or 5.4%, to $20.03.

The outlook is also uncertain for MetLife, after the insurance company trimmed its fourth-quarter earnings guidance and said it could report a loss for the period. MetLife (nyse: MET - news - people ) still managed a $1.19, or 3.9%, gain, to $31.95.

Ten spots where folks have enough money for everyday expenses, and 10 where daily budgets eat up a sizable chunk of incomes.

In Depth: America's Most And Least Family-Friendly Cities

If you are making an extra effort to unplug the cellphone charger and turn off the lights, you're not alone. Americans everywhere are sweating their daily expenses.

It's likely that none are doing so more than those in New York. There, families struggle to keep their budgets balanced and probably worry about paying for expenses like food, health care and housing more than residents of virtually any other major city in the country.
That's because New York is the least affordable metropolitan area for families in the nation. Though New Yorkers earn quite a bit compared to the rest of the country--their median income is the eighth-highest of the 40 largest Census-defined U.S. cities we surveyed--the cost of a family's most basic living expenses is nearly as high, accounting for a whopping 93% of annual pay. If the typical family throws in an occasional trip to the movie theater, music lessons for the kids or membership to a fitness center, they will soon find themselves in the red. Folks in cities with more money left over will have an easier time providing for their families. Education costs were not available and were not factored into our ranking.

One of the chief architects of a plan to bail out the Detroit auto companies said today that General Motors Chairman G. Richard Wagoner should be forced to give up his post as a condition of receiving emergency loans from the federal government.

General Motors, Ford Motor and Chrysler's desperate pleas for government aid were heard. Over the weekend, legislation to provide the big three with short-term loans to get them through the new year is being drafted, following an agreement between Speaker of the House Nancy Pelosi and President George Bush on how to fund the rescue.

Pelosi on Friday agreed to go the White House route and use loans from the Department of Energy originally intended to insure the companies would develop green cars in the future, rather than tap Treasury Secretary Henry Paulson's $700 billion Troubled Asset Relief Program funds.

Mark Zandi, the chief economist of Moody's Economy.com told the Senate that an automaker's bankruptcy would be "cataclysmic." With unemployment at 6.7%, gross domestic product in a tailspin and the banking sector wobbling like a newborn doe, the White House and Congress remain understandably averse to cataclysms.

"We must first prevent additional job loss from occurring. We cannot let the auto industry collapse, which would be catastrophic to our economy," said a Friday statement from Sen. Chris Dodd, the chair of the Senate Banking Committee, signaling his support.

President Bush's remarks Friday were much the same: "It is important that Congress act next week on this plan. And it's important to make sure that taxpayers' money be paid back if any is given to the companies."

It's a much better outcome for the automakers than after their first trip to Capitol Hill, where they flew in on private jets, presented vague plans and were sent home empty-handed. But before Detroit starts cheering, they'd be smart to recall a similar situation a couple months ago. If the $700 billion bailout of the financial system holds any lesson it's this: The car companies are not out of the woods yet.

Paulson's request for $700 billion two and a half months ago is fresh in the minds of those on Capital Hill. Deny him the money, he said, and the economy would implode. Any future economic problems (which by September were inevitable) could be blamed on the inaction of Congress. Despite the threat of apocalypse, they balked for two solid weeks as volleys of constituent disapproval filled the e-mail inboxes of Congress. At one point, the House's Web server crashed from the load. He ultimately got his money, but only after a political brawl unparalleled in recent memory.

America's automakers may be even less loved than America's bankers. All of this has the strong ring of deja vu, and just as rank and file Congressmen balked at bailing out Wall Street, embarrassing party leaders and forcing a dramatic showdown on the Hill, the deal for Detroit is far from done. The challenge is not writing the legislation this weekend. It's getting it passed next week. Are Pelosi and the Democrats up to the challenge? Detroit sure hopes so.

Members of Congress wanted Detroit's Big Three automakers to redo their homework before they resumed begging for a government bailout today. So how'd they do?

It doesn't matter. If a Senate Banking Committee on the matter Thursday was any indication, the failure of America's automakers poses such a danger to the economy that lawmakers seem less focused at this point on whether they'll give the automakers a bailout, and more so on how they'll do it.

"We're not going to leave town without trying," committee chairman Sen. Christopher Dodd, D-Conn., said of their efforts to provide funding for General Motors (nyse: GM - news - people ), Ford Motor (nyse: F - news - people ) and Chrysler.

That augurs well for GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli as they prepare for day two of hearings before the House Financial Services Committee Friday. But by no means should the Big Three, their suppliers, dealers or the United Auto Workers union breathe a sigh of relief. If there's any group that can kick around ideas and take no action on them, it's Congress.

Still, for advocates of a bailout, the horizon is less cloudy than it was at the beginning of the week. For one thing, not a single witness at Thursday's hearing opposed the idea of a government bailout, though Mark Zandi of Moody's Economy.com, who was also on the panel, says he believes the companies will need $75 billion to $125 billion to avoid bankruptcy--not the $34 billion they have requested.

In addition, the automakers are all open to various propositions put forth by the senators Thursday. The most popular of these is the idea of a government oversight board or trustee to manage the bailout, akin to the group that handled the government bailout of Chrysler Corp. in 1979 and 1980.

They're also agreeable to an idea put forth by Sen. Bob Casey, D-Pa., to subject the auto companies to monthly benchmarking so the government can ensure the money is being used as it sees fit. The Big Three are fine with having the Fed regulate their financing arms and another body (probably the oversight board) regulate the manufacturing companies. And they're on board with the idea of giving taxpayers the most senior position when it comes to repayment of the loans, though Ford has a slight complication with this because the company has already mortgaged all of its assets. Nonetheless, Mulally says "there must be a way" to work around this dilemma.

Detroit automakers laid out their worst-case business scenarios for Congress Tuesday, asking for up to $38 billion in taxpayer loans to survive the economic crisis and turn their companies around.

General Motors (nyse: GM - news - people ) is seeking up to $18 billion, Chrysler wants $7 billion and Ford (nyse: F - news - people ), which says it doesn't need a loan at the moment, is asking for a $9 billion line of credit--perhaps as much as $13 billion--in case the economy worsens.

The requests, filed Tuesday on Capitol Hill, were accompanied by extensive details of how the automakers plan to reduce labor costs, streamline products and restructure their balance sheets in order to return to profitability.

Chief executives from each of the companies will answer questions about their viability plans when they appear before Senate and House committees later this week.

America's carmakers have been steadily downsizing for years in an effort to become more competitive with foreign-based rivals. But the crisis that has brought at least two of them--GM and Chrysler--to the brink of bankruptcy is an opportunity to take more drastic measures.

Indeed, GM said it would cut its current stable of brands from eight to four--dumping Saturn, Saab and Hummer, and paring back Pontiac to a few niche models. GM also expects to reduce the number of dealers from 6,450 to 4,700 by 2012.

GM also plans to close nine powertrain, stamping and assembly plants in the U.S. by 2012, and reduce its total U.S. employment to between 65,000 and 75,000, from 97,000 today.

When Detroit's Big Three CEOs return to Washington on Dec. 2 with a plan tailored to sell Congress on a $25 billion bridge loan, they will try to convince lawmakers that they are in the throes of big restructuring moves that will bring profits back as soon as the economy picks up.

Sources at the companies and in Congress say that General Motors (GM), Ford Motor (F), and Chrysler are mulling symbolic moves like executive pay cuts and scaling back use of corporate planes.

But given the huge debt load they may be taking on, they might have to show more substantial ways to save money. Congress will be allocating billions in taxpayer dollars to invest in the Big Three carmakers, so the lawmakers should know what the prospects are for these companies to compete should the bridge loan see them through the downturn.

Close to the Brink

It's not pretty. All three companies are already carrying massive debt and interest payments that will sap their ability to develop and market new models once the economy turns around. GM has $43 billion in debt and Ford has $24.9 billion in borrowings. "Their debt burden has been escalating for some time," says Mark Oline, managing director for debt-rating agency Fitch & Co. "These companies will be smaller so their earnings capacity will be smaller. The interest will be a big burden."

Let's look first at GM, which is closer to the brink of collapse than Ford. GM already pays more than $3 billion a year in interest. JPMorgan (JPM) analyst Himanshu Patel estimates that GM needs $17 billion in government loans to make it through 2009. That would add another $900 million in interest. That means GM would have close to $60 billion in debt and more than $4 billion a year in interest payments.

Plus, GM has to pay back $2.3 billion next year, $200 million in 2010, and $1.7 billion in 2011, according to company financial statements. All of that will require cash that could go into new cars, marketing, or disposing of brands.

Health-Care Trust Could Help

Ford pays $2.4 billion a year in interest. While the company is in a better cash position, since it borrowed $23 billion while credit markets were liquid, its interest costs also would rise.

The carmakers racked up huge debt over the past few years largely to fund pension plans, buy out workers, close plants, and set up a union-led health-care trust that will hand management of medical benefits to the UAW.

GM President and COO Frederick A. Henderson said in a Nov. 18 interview that the debt is only a big burden if GM can't improve profits. A union health-care trust, called a voluntary employee benefits association, or VEBA, would save $4.8 billion a year in cash outlays. That deal and other union concessions will make the company more profitable once the market turns around (BusinessWeek.com, 9/26/08).

Congress to Detroit: What's Your Plan?

If the Big Three automakers can't come up with a radical plan that will satisfy Congress, they can kiss the $25 billion bailout goodbye

The Ford Flex rolls off the assembly line at an assembly facility in Oakville, Canada. Simon Hayter/Getty Images

By David Welch

After going to Capitol Hill and begging for a $25 billion bailout, the three chief executives of General Motors (GM), Ford (F), and Chrysler have been sent away with a request for a "plan" by members of Congress. And if they want to get the taxpayers' money they so desperately need, they had better come up with something good.

The problem is, there's not a lot they can say that Congress, specifically Senate Republicans, wants to hear.

Many people, inside and outside the industry, believe the Big Three need to make wrenching cultural and strategic changes if they are to survive. One is former Treasury Secretary Paul H. O'Neill, who sat on the GM board from 1993 to 1995. "This is not going to work," O'Neill says, "unless there is 100% change [in Detroit]."

Which brings us to the question: How can government give Detroit a bridge loan while ensuring that the companies do more to be competitive? While the automakers offered nothing new in Washington, GM sources say President and Chief Operating Officer Frederick A. "Fritz" Henderson has talked almost daily with United Auto Workers President Ron Gettelfinger, discussing different things the two sides can do to cut costs. For its part, Ford says it can last into later next year, and Chrysler has been seeking a buyer.

UAW Calls for Concessions

In the meantime, government, labor, and the automakers need to come up with a plan that Congress will buy. Otherwise, bankruptcy is a possibility. If that happens, buyers would be turned away and revenue would plummet, Henderson said in an interview on Nov. 18.

But here's the tricky part. According to one Big Three lobbyist, Democratic congressional leaders don't want a plan that slashes jobs and cuts union benefits. Republicans think that's a great idea. With no clear direction from Washington yet, here's what a smart bailout package might look like. Let's start with the union. There's no question the UAW has made huge concessions over the past three years. The union cut more than 100,000 jobs and agreed to a new $14-an-hour wage for new workers (half the rate of veteran employees), as well as a health-care deal that will make GM much more competitive with Toyota (TM). Detroit will reap that savings mostly in 2010.

But there's a big problem. None of the companies can hire new workers because they have to retire the veterans first. Plus, sales are too low to justify new hiring so none of them have been able to realize the savings, says Henderson. For GM, he says the company can find its breakeven point even at sales rates as low as 11 million or 12 million vehicles a year, but it will take time and any new action must be negotiated.

To see these companies through to 2010—and send the message to Congress that management and the union are serious about helping to build the bridge—the UAW could agree to cut to Toyota-level pay and lower benefits at least until the loans are repaid. The good news is that UAW chief Gettelfinger indicated at a news conference on Nov. 20 that he'd be willing to do something. "The UAW is at the table," he said. "We welcome all stakeholders to make concessions."

White-Collar Perks Under Scrutiny

So the union is prepared to make cuts if Congress demands it. UAW workers in domestic plants make $29 an hour while Toyota workers make at most $25.