* Investors fret about automakers after bailout collapse
* Wall St figure accused of running large fraud scheme
* Dow, S&P off more than 1 pct, Nasdaq sheds 0.6 pct
* For up-to-the-minute market news, please click on
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(Updates to early morning)
By Chuck Mikolajczak
NEW YORK, Dec 12 (Reuters) - U.S. stocks fell on Friday as
investors worried about the survival of U.S automakers after a
proposal to give them urgent government funding hung in the
balance.
Fears of a possible bankruptcy of one or more U.S
automakers rattled investors, sending stock markets tumbling
around the globe.
But signs that the White House and U.S Treasury were
prepared to mount a last-ditch effort to aid the carmakers,
including General Motors <GM.N> helped stave off a huge
sell-off on Wall St.
"There will be some type of action to prevent a collapse,"
said Tim Ghriskey, chief investment officer of Solaris Asset
Management in Bedford Hills, New York. "That doesn't mean they
don't need to be significantly restructured, which would entail
people losing jobs, factories closing, new management in some
cases and certainly new oversight."
Also shaking investor confidence was the arrest of former
Nasdaq chairman Bernard Madoff who was charged with running a
$50 billion "Ponzi scheme" in what would be one of the largest
fraud cases ever.[]
The Dow Jones industrial average <> fell 134.61 points,
or 1.57 percent, to 8,430.48. The Standard & Poor's 500 Index
<.SPX> dropped 13.10 points, or 1.50 percent, to 860.49. The
Nasdaq Composite Index <> shed 9.02 points, or 0.60
percent, to 1,498.86.
Shares of General Motors slumped 11 percent to $3.66 while
Ford Motor <F.N> fell 8 percent to $2.66. At the market open GM
had fallen more than 30 percent and Ford more than 20 percent.
A measure to provide $14 billion in loans to avert a
possible bankruptcy among General Motors, Ford and Chrysler
died in the Senate late on Thursday after opposition from
Republicans. For details, see []
"You have three very significant companies that have said
they can't operate through the end of the year without help,"
said Cleveland Rueckert, market analyst at Birinyi Associates
Inc Stamford, Connecticut.
The collapse of a proposed bailout for U.S. automakers
raised fears of a deeper economic slowdown and further
financial shocks that may jeopardize worldwide efforts to ease
a global recession.
"People are very worried about the ramifications of their
potential bankruptcy," Rueckert said.
Friday's decline meant further headwinds for a market that
has been trying to recover from an 11-year low hit on Nov. 21.
So far this year the broad S&P 500 is down about 40 percent,
but since the November low the index has pulled itself up 16
percent.
GM, Ford and Chrysler employ nearly 250,000 people directly
and 100,000 more jobs at parts suppliers could hang on their
survival.
Shares of Caterpillar <CAT.N>, a big manufacturer, dropped
3.8 percent to $40.59 after Goldman Sachs put a sell rating on
the stock.
(Additional reporting by Ellis Mnyandu; Editing by Kenneth
Barry)
