-- A key House Democrat is writing legislation that would 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 and Senate Majority Leader Harry Reid are pressing for quick passage of an auto bailout during a postelection session of Congress that begins Tuesday.
The legislation being drafted by Democratic Rep. Barney Frank, chairman of the Financial Services Committee, would dip into the $700 billion Wall Street rescue money approved by Congress last month for the auto aid. President Bush is cool to that idea, although the White House says he is open to helping the troubled industry.
Treasury Secretary Henry Paulson called autos a "critical industry" Wednesday but said a $700 billion financial rescue program wasn't designed for them. The White House said it is open to new ideas.
"We are going to work with Congress, we are open to their ideas," White House spokeswoman Dana Perino said. "If they are going to amend or accelerate those funds we will certainly look into their ideas and work with them."
On Tuesday, Speaker Nancy Pelosi said the House of Representatives may reconvene for a lame-duck session to work on legislation that would provide financial assistance to the automakers.
Paulson said Congress could try to make funding more available to the auto industry as part of a $25 billion loan program approved in September to develop fuel-efficient vehicles. But, he cautioned that "any solution has got to be leading to long-term viability" for auto companies.
Pelosi, in her statement, said, "In order to prevent the failure of one or more of the major American automobile manufacturers, which would have a devastating impact on our economy, particularly on the men and women who work in that industry, Congress and the Bush administration must take immediate action."
The Senate also plans to address needs in the auto industry, Senate Majority Leader Harry Reid said in a statement. The Senate was already scheduled to be in session.
The automakers, which have been struggling all year, went into a tailspin in September and October as the new car market collapsed amid the credit lockup and falling consumer confidence. Sales in October were the lowest since 1982.
That's left the companies in a cash crunch. On Friday, General Motors gmsaid it has just enough cash to last through the end of the year and possibly halfway through 2009. Ford f has enough money to make it through the third quarter next year at current cash-burn rates.
Tuesday, shares of both fell to record lows. GM closed at $2.92, down 13%, a 65-year low. Ford fell to $1.80, down 6.8%.
In an attempt to save cash, GM has said it is postponing some future product development and has eliminated white-collar retiree health care and contributions to 401(k) retirement accounts. On Tuesday, it also announced that it isn't sending executives to the Los Angeles auto show next week, and won't show the new Buick it had intended to give its U.S. debut there.
The Bush administration has been focused on accelerating loans recently funded but yet to be granted. They are part of a program in the energy law that was intended to help automakers retool plants for producing more energy-efficient cars.
Democrats are looking to provide more through some sort of direct loans with fewer limitations. President-elect Barack Obama has said help for the automakers is one of his top priorities.
Pelosi said any assistance given the auto industry would come with strings: limits on executive compensation, rigorous oversight and "other taxpayer protections to ensure that any companies that benefit from this assistance — and not the taxpayers — bear the full burden of repaying any costs that are incurred."
Michigan Gov. Jennifer Granholm said Wednesday that the crisis in the auto industry is urgent, arguing that "the national economy rests on this."
"This industry supports one in 10 jobs in the country," Granholm said Wednesday on CBS' "Early Show." "If this industry is allowed to fail, there would be a ripple effect throughout the nation."
She added: "This government decided that it was going to step in and throw $700 billion at the financial sector. We're just asking for a fraction of that."
Contributors: USA TODAY's Sharon Silke Carty in Detroit, wire reports