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Democrats in Congress Agree to Push Auto Bailout Plan

Posted by tothewire on December 6, 2008

Details of the rescue package were not immediately available but senior Congressional aides said that it would include billions of dollars in short-term loans to keep the automakers afloat at least until President-elect Barack Obama takes office.

Ending a weeks-long stalemate between the Bush administration and House Speaker Nancy Pelosi, senior aides said that the money would likely come from $25 billion in federally subsidized loans intended for developing advanced fuel efficient cars.

Ms. Pelosi had resisted using that money, which was approved as part of an energy bill last year, and Democrats had called repeatedly on the Bush administration or the Federal Reserve to act unilaterally, using existing authority, to aid the auto companies.

On Friday, Ms. Pelosi said that she would allow that money to be used provided “there is a guarantee that those funds will be replenished in a matter of weeks” and that there was no delay in working toward higher fuel-efficiency.

Word of a breakthrough came as Congress wrapped up two days of hearings at which lawmakers grilled the chief executives of the companies, Chrysler, Ford and General Motors, and experts warned that GM could collapse by the end of this month.

But it was the Labor Department’s report of 533,000 jobs lost in November that seemed to put a final halt to the hand-wringing on Capitol Hill and prompted the Democrats to announce that they would draw up legislation for votes next week.

“Today’s announcement of major job losses and findings from Congressional hearings from the last two days make it clear that Congress must work on a bipartisan basis to provide short-term and limited assistance to the automobile industry while it undertakes major restructuring,” Ms. Pelosi said in a statement.

She added: “Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long term viability and competitiveness of the American automobile industry.”

Staff members of the Senate banking committee had begun drafting legislation on Friday and were expected to work through the weekend. Senior Democrats have proposed a strong oversight board or trustee to monitor any aid to the automakers.

“We aim to have votes next week on a responsible plan to help the millions of Americans who rely on a healthy auto industry for their livelihoods,” the Senate majority leader, Harry Reid of Nevada, said in a statement on Friday evening.

“We will need support and cooperation from Republicans to determine what that vote happens and whether it will succeed,” Mr. Reid said.

The Republican leader, Senator Mitch McConnell of Kentucky, had said previously that a deal an aid to the auto industry was possible using the money authorized in last year’s energy bill.

But some Republicans, including Senator Richard C. Shelby of Alabama, the senior member of the banking committee, have said they will oppose a taxpayer financed rescue for the automakers under any circumstances.

Some conservative House Republicans have called openly for allowing one or more of the auto companies to fail and enter bankruptcy.

The reception in the House Financial Services Committee on Friday contrasted with that at a Senate committee hearing on Thursday, where the auto executives were confronted with pent-up anger and the harsh politics of a recession and the realization that their supporters might not be able to muster the votes to save them.

Even so, there were persistent differences during the House hearing about where the money for the automakers should come from, and lawmakers made clear that any availability of federal money would be linked to strict supervision.

“There’s still a lot of disagreement on how to do it,” Rep. Barney Frank, a Massachusetts Democrat, said after the hearing, “but there’s much less disagreement on whether or not to do it.”

There was some sentiment during the hearing for tapping into the $700 billion banking bailout, known as the Troubled Asset Relief Program, or TARP, that was enacted by Congress in September in an effort to counter the growing financial crisis.

But President Bush opposes using any of that TARP money to aid the automakers. He has called instead for redirecting $25 billion already allocated for the companies to retool to make their vehicles more fuel-efficient. But the automakers say that amount will not be enough for them, and the president indicated no change in his stance on Friday.

“I am concerned about the viability of the automobile companies,” Mr. Bush said. “And likewise, I am concerned about taxpayer money being provided to those companies that may not survive.”

The auto executives, who have encountered skepticism and even hostility in their appearances at the Capitol, may have heard a glimmer of hope in the words of the House panel’s leading Republican, Representative Spencer Bachus of Alabama, who said he might be persuaded to vote for help for the embattled General Motors, Ford and Chrysler.

“Personally, the only course I could possibly endorse would be limited transitional assistance to allow the American domestic automobile industry to return to solvency and profitability,” Mr. Bachus said. “But then only if there is a reasonable expectation of success.”

“What we need is a solution, not a first installment,” Mr. Bachus said.

The auto chiefs were subjected to lectures all morning, even though they had inherited some of the problems from the executives of a previous era, when Detroit ruled the automobile world, buyers seemed to want big cars and gasoline was cheap.

Rick Wagoner, the chairman of General Motors, noted that G.M. was celebrating its centennial this year and looking back to its “many successes.”

“We also have learned from the mistakes we have made,” Mr. Wagoner said.

He predicted that any taxpayer money his company borrowed could be repaid by the end of 2012.

And what if even one of the Big Three failed, one committee member asked. Could there be a chain reaction that would also topple the other two automakers, sending repercussions throughout the economy as various supplier companies for Detroit also collapsed?

The collective answer of the auto executives and the auto union leader was yes. Besides Mr. Wagoner, those testifying included Robert L. Nardelli and Alan R. Mulally, the heads of Chrysler and Ford, respectively, and Ron Gettelfinger, head of the United Automobile Workers, which is now prepared to make sacrifices that would have been unthinkable for the membership not many years ago.

Even those House committee members who hinted on Friday that they might consider some kind of lifeline for the auto companies had harsh words for the chief executives.

“The condition of the auto industry is one of your making,” said Representative Gary Ackerman, a New York Democrat. He said he was disturbed that the executives’ first “seat of the pants” estimate concluded that they needed about $25 billion in aid to stay afloat. But now, he noted, they say they need $34 billion.

Representative Peter King, Republican of New York, said he might support some assistance (“I’m not saying I won’t”), provided he is convinced that it has “a reasonable chance of working.”

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2 Responses to “Democrats in Congress Agree to Push Auto Bailout Plan”

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