White House Assessing Options to Aid Carmakers

One way is to tap directly into the $700 billion financial rescue bailout fund to provide loans to the carmakers. Another is to use part of the bailout fund as a kind of collateral for emergency loans the automakers could get from the Federal Reserve. The administration also could do nothing, leaving open the possibility that one or more of the automakers could go bankrupt. It also could wait for the new Congress, flush with more Democratic votes when it returns in early January, to try again to get bailout legislation passed.

Pontiac G6 and Chevrolet Malibu's are shown at the General Motors Orion Assembly plant in Orion...

Pontiac G6 and Chevrolet Malibu's are shown at the General Motors Orion Assembly plant in Orion Township, Mich., Friday, Dec. 12, 2008. Festering animosity between the United Auto Workers and southern Senators who torpedoed the auto industry bailout bill erupted into full-fledged name calling Friday as union officials accused the lawmakers of trying to break the union on behalf of foreign automakers. (AP Photo/Paul Sancya)

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"In terms of what happens next, it seems like the real question is `How long can GM really hold out?'" said James Gattuso, a research fellow in regulatory policy at the Heritage Foundation. "I've heard a couple of weeks and I've heard through February. I think only the people on the inside of GM know that."

For weeks, the White House has insisted that the $700 billion financial industry rescue plan enacted in October should be used solely to help financial institutions. On Friday, however, the White House signaled that it would consider using the so-called TARP — Troubled Assets Recovery Program — to prevent auto manufacturers from collapsing.

Critics quickly pointed out the administration's U-turn. They insisted the White House reject calls to do an end-run around Congress and unilaterally use TARP money to help the carmakers. "You're dealing with a significant amount of money and sums of this sort just simply can't be repurposed just because it's there," Gattuso said.

A second possibility offers Bush some political cover. Treasury Secretary Henry Paulson could use part, but not all, of the $15 billion left of the first $350 billion allocated to the TARP to back up loans the automakers could get from the Fed's emergency lending program. That would leave some money to help troubled financial institutions, which Bush has long argued should be the first in line for TARP money.

Federal Reserve Chairman Ben Bernanke has said he's reluctant to use the Fed's emergency lending program for the automakers. Decisions about giving financial aid to Detroit are best left to Congress, he says.