Other articles by Martin Crutsinger:

Stimulus money more likely to be saved rather than spentMay incomes surge, but savings outpace spendingHousing construction, permits hit record lowsDisappointing April retail sales send stocks downRetail sales drop unexpectedly in AprilDurable goods, new home sales better than expectedTreasury says about $110B left in bailout fundIMF: Losses from global credit crisis mountingMarch housing construction falls 10.8 percentRetail sales fall unexpectedly in March

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WASHINGTON — Evidence of a recession piled ever higher Friday, with new figures showing Americans are spending less and gloomy about the economy, while the government signaled it won't buy stock in the financing arms of auto companies to prop them up.

The Commerce Department reported consumer spending dropped 0.3 percent in September while incomes, the fuel for future spending, managed a 0.2 percent gain.

That followed a report a day earlier that the U.S. economy shrank by 0.3 percent in the third quarter. One accepted definition of a recession is two straight quarters of a shrinking economy.

Closing out the worst October in 21 years but one of the best weeks ever, investors did some bargain shopping on Wall Street, snapping up stocks that have plunged in value. The Dow Jones industrial average gained nearly 145 points.

Meanwhile, beleaguered U.S. automakers are seeking federal help beyond the money available for them as part of a financial industry bailout and a loan package to fund more fuel-efficient cars, the White House said Tuesday.

White House spokeswoman Dana Perino said the auto industry has talked to the Bush administration about funding on a much broader scale than the two programs approved by Congress earlier this fall.

The wrangling over the broader rescue program continued, with Democrats stressing that Congress wants the package to be used to pump new loans into the economy, not diverted to stockholders or executives or to buy other banks.

"I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed," said House Financial Services Committee Chairman Barney Frank, D-Mass. He announced hearings on the rescue package Nov. 12 and 18.

The Treasury Department said it would extend a Nov. 15 deadline for banks that do not have publicly traded stock to apply for the government stock-purchasing plan — a plan that could extend to 6,000 banks.

The bank rescue is intended to shore up financial companies and get lending, the lifeblood of the economy, going again.

Federal Reserve Chairman Ben Bernanke said in a speech that whatever system is constructed after the government takeover of mortgage giants Fannie Mae and Freddie Mac must have better safeguards to make sure it can work during times of stress.

Bernanke said the credit crisis had exposed serious deficiencies in areas beyond home loans.

"The boom in subprime mortgage lending was only part of a much broader credit boom characterized by underpricing of risk, excessive leverage and the creation of complex and opaque financial instruments that proved fragile under stress," Bernanke said.

As the nation learns more about what went wrong, the economy grows ever bleaker. The Commerce Department report that consumer spending fell by 0.3 percent in September followed two months in which spending was essentially flat.

A separate survey released Friday by the University of Michigan and Reuters showed consumer confidence in October fell to 57.6 from 70.3 in September, the biggest one-month drop in the survey's history, which dates to 1978.

And economists expect Americans to cut back further. The nation's financial outlook is dimming just as the critical holiday shopping season looms, and stores are bracing for one of the worst on record.

David Wyss, chief economist at Standard & Poor's in New York, said he believed the recession could turn out to be the longest in the post-World War II period.

"Things are still looking soft and the light at the end of the tunnel is a long way off," Wyss said.

In a separate report, the Labor Department said the wages and benefits of U.S. workers rose by a modest 0.7 percent in the third quarter, the same as in the first and second quarters.

The spending report showed that an inflation gauge tied to spending edged up just 0.1 percent in September. But prices over the past year are up by more than 4 percent, and inflation is outside the Fed's comfort zone.