WASHINGTON — Congressional Democrats are pushing legislation to send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., hope for quick passage of the auto bailout during a post-election session that begins Monday.
Legislation being drafted by Rep. Barney Frank, chairman of the House Financial Services Committee, and Sen. Carl Levin, D-Mich., would dip into the $700 billion Wall Street rescue money, approved by Congress last month, for the auto aid.
President George W. Bush is cool to that idea, but the White House says he is open to helping the industry, which is buckling under poor sales, tight credit and a sputtering economy.
In an Oval Office meeting on Monday, President-elect Barack Obama spoke to Bush about doing more to aid the industry, aides said, and Bush said he was open to it.
Any effort to throw the companies a lifeline could run into GOP roadblocks that could derail it in the Senate. In that chamber, Republicans, including some who believe their votes for the Wall Street bailout hurt, and in some cases doomed, their re-election bids, are loath to agree to any new money.
Sen. Mitch McConnell, R-Ky., the minority leader, was noncommittal about additional aid.
In a statement, McConnell's spokesman said Congress should move to speed the release of a $25 billion loan program passed earlier to help the carmakers develop fuel-efficient vehicles.
"It may be that there are changes that need to be made in order to expedite these low-interest loans. Other ideas have been floated and all will receive a review as we approach the Senate's return next week," said Don Stewart, the spokesman.
Pressure is building on lawmakers in both parties to back a more sweeping rescue that could extend far beyond the Big Three.
Auto suppliers, which represent the largest manufacturing sector in several politically important states, including McConnell's, are clamoring for a piece of any rescue.
"There's so much connection between the buyers and the manufacturers that we feel that the program has to be inclusive," said Ann Wilson of the Motor and Equipment Manufacturers Association.
Suppliers also are the dominant manufacturing presence in Michigan, Indiana, Missouri, Ohio, Tennessee and Illinois, she noted.
Paulson is reluctantTreasury Secretary Henry Paulson said Wednesday that the auto sector was "critical" but that the financial industry rescue was not designed for car companies.
"Any solution has got to be leading to long-term viability" for auto companies, Paulson said.
He also suggested that Congress could try to use the loan program already in place to help the companies.
But Democrats say those loans were designed to help automakers adapt to new fuel standards, not to stave off the financial disaster the companies now say is imminent.
White House press secretary Dana Perino said that Bush understands the importance of the industry but that the carmakers' problems — decades in the making — cannot be blamed on the administration or the recent financial meltdown.
"Look at the history of these companies, decisions they've made over time that got them to where we are today," Perino said.
Frank's legislation would carve out a portion of the $700 billion financial rescue program for the Big Three automakers, letting the government take an equity stake in them in exchange for the loans, said Frank's spokesman, Steven Adamske.
The Treasury could take warrants to share in a portion of future profits and would have to be paid back before any other shareholder. The car companies would face tougher restrictions on awarding pay packages to executives and dividends to their shareholders than the financial companies that get a piece of the original bailout.
Auto executives, labor leaders and other industry proponents are mounting an intense lobbying effort for a bailout. They want an immediate $25 billion loan to keep the companies operating and a separate $25 billion to help cover future health-care obligations for retirees and their dependents.
The Big Three and United Auto Workers will have a high-profile chance to make their case at a hearing next Wednesday before Frank's committee.
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