WASHINGTON -- Key members of Congress said today they are preparing emergency legislation that would provide more federal aid to the auto industry.

House Speaker Nancy Pelosi, D-Calif., said a bill is being drafted to provide "emergency and limited financial assistance" to the industry as part of a $700 billion financial rescue program already on the books.

Sen. Carl Levin, D-Mich., also announced plans for bipartisan legislation to aid the industry. He said it will be introduced if the Bush administration fails to "understand the impact of the auto industry on the economy" and refuses to approve loans from the $700 billion bailout fund, aimed mainly at banks.

Separately, Sen. Barbara Mikulski, D-Md., is planning to announce Wednesday a bill that would make automobile loan interest deductible from federal taxes, Automotive News has learned.

The proposal is part of a package of ideas the National Automobile Dealers Association advocates to boost business at dealerships and lift the nation's economy.

Maryland dealers deserve credit for getting the proposal on interest deductions introduced in Congress, said NADA spokesman Bailey Wood.

Mikulski is scheduled to announce details of her bill in appearances at two Maryland dealerships Wednesday. The bill also would make vehicle sales or excise taxes deductible from federal taxes.

Pelosi, in a statement on her Web site, said: "I have asked Chairman Barney Frank of the House Financial Services Committee to work with House and Senate leaders, and with the Bush administration, to craft legislation to provide emergency and limited financial assistance to the automobile industry" under the bank bailout law.

"Emergency assistance to the automobile industry would be conditioned on executive compensation restrictions, a prohibition on golden parachutes, rigorous independent 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," Pelosi said.

All of the bills would be considered during a lame-duck session of Congress, scheduled to begin on Monday. But uncertainly hangs over the session.

John Podesta, co-chairman of President-elect Barack Obama's transition team, today disputed reports that President Bush is tying stimulus legislation to congressional approval of a free trade agreement with Colombia. Democratic leaders oppose the trade deal.

Obama and Bush merely exchanged views on the two issues during a meeting at the White House Monday, Podesta said at a briefing.

On Sunday, Senate Majority Leader Harry Reid, D-Nev., said he sees no point in bringing up a stimulus bill if Senate Republicans aren't willing to provide some votes.

Automakers and the UAW want the lame-duck Congress to consider approving $25 billion in government loans to health benefit trusts for retired autoworkers, and directing federal agencies to make other emergency loans to help strapped auto companies avoid collapse.

Wood said NADA is working with Congress on other proposals to aid dealers. NADA seeks tax credits for car and truck buyers and faster write-offs for businesses that buy vehicles.