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Dodd Highlights Systemic Risks Of Auto Collapse

Treasury Secretary Henry Paulson has objected to using bailout money for Detroit by arguing that the purpose is to protect the financial industry. Banking chairman Chris Dodd (D-Conn.) tried to rebut that point at the auto executive hearing Tuesday.

He asked the executives what the impact on the financial sector would be if the automakers filed for bankruptcy. They didn't initially understand the question, and answered that suppliers, car dealers and workers would be at risk.

Dodd clarified that he was referring specifically to the financial industry. The executives, catching his drift, said that banks who had lent to the automakers would be at risk, as would investors associated with their own credit and investment vehicles, which make up a large portion of the auto companies' business.

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