White House mulling TARP funds for automakers

WASHINGTON -- The Bush administration, signaling a possible shift in policy, will consider using money set aside for the rescue of financial institutions to make emergency loans to automakers, the White House said this morning.

The word comes in the aftermath of stunning rejection by the Senate last night of legislation to provide $14 billion in emergency loans to prevent the collapse of General Motors and Chrysler LLC.

President Bush and his appointees have resisted using any of $700 billion approved in October for financial institutions to provide industry help under the Troubled Asset Relief Program, or TARP. Democrats contend the failure of one or more automakers would have widespread devastating economic effects.

It's unclear when the White House or U.S. Treasury will make a decision about using TARP funds for the auto bailout.

Of the first $350 billion in the TARP fund, about $15 billion has not yet been committed, wire services reported this morning.

That happens to be the amount GM and Chrysler say they need to survive to the end of the first quarter of 2009.

To access the second $350 billion, the administration must seek fresh approval from Congress.

U.S. Sen. Carl Levin, D-Mich., said the effort to provide the emergency bridge loans remains “very much alive.”

“I am encouraged that the White House said today that they will consider other options to assist the auto companies, including use of the TARP program,” Levin said in a statement.

“Use of TARP funds is the fastest, most feasible, most immediate and most certain approach to provide the emergency bridge loans needed by the auto companies.

“I am hopeful that the President will act promptly to prevent this collapse and the resulting calamity for our economy.”

A Treasury Department spokeswoman said the government is ready to prevent the failure of car makers until Congress reconvenes.

"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury spokeswoman Brookly McLaughlin said.

The Michigan congressional delegation, in a letter today to the White House, asked the Bush administration to provide emergency loans to automakers so they can survive until Jan. 6.

That's when a new Congress convenes and could consider "legislation relating to the long term restructuring and viability of the domestic automobile industry," the lawmakers said.

GM released the following statement this morning:

"We are encouraged by the White House's willingness to consider other options, including the TARP program, for immediate aid to the domestic auto industry. We are prepared to work closely with the Administration on possible solutions that could prevent further damage to our nation's economy and also allow us to embark on an aggressive restructuring plan for long term viability."

Here is the statement by White House Press Secretary Dana Perino, referring to the financial rescue fund, known as the Troubled Assets Relief Program, or TARP:

“It is disappointing that while appropriate and effective legislation to assist and restructure troubled automakers received majority support in both houses, Congress nevertheless failed to pass final legislation.

“The approach in that legislation provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds go only to firms whose stakeholders were prepared to make the difficult decisions to become viable, competitive firms in the future.

“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.

“While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable.”

Reuters contributed to this report

Washington, DC – The Members of the Michigan Congressional Delegation this morning agreed to send the following letter to President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. The Members asked for the Administration to provide immediate emergency funding in the form of a loan to the domestic automakers.

This letter has been signed by as many Members of the Michigan Congressional Delegation as could be reached upon short notice this morning. Absence of a Member’s signature on the letter should not be construed as disagreement with its content.

Below is the letter:

Dear President Bush, Secretary Paulson, and Chairman Bernanke,

We commend your efforts to work with the Congress to enact legislation that would provide assistance to the domestic automakers. We share your disappointment that the Senate fell eight votes short of obtaining the sixty votes necessary to consider legislation negotiated with the White House and approved in the House of Representatives by a bipartisan majority that would have provided federal loans to the domestic automakers.

As you know, the global financial crisis is crippling the availability of credit for the automakers, their suppliers, their dealers and consumers. One or more of the domestic automakers now face the real possibility of failure before the end of the year unless financial assistance is immediately forthcoming. This result will plunge our nation further into recession, add hundreds of thousands to the employment rolls in a matter of weeks, and deliver a crippling blow to the manufacturing sector from which it may never recover. Other nations are acting to assist their automotive industries and the U.S. must do the same.

The Department of Treasury and the Federal Reserve have existing authorities they can use to give this vital industry access to the capital it needs to survive this recession, a position that was supported by Gene L. Dodaro, the Acting Comptroller General of the United States, in his testimony before the Senate Banking and House Financial Services Committees last week. We appreciate your willingness to consider existing options available to you, including use of the Troubled Asset Relief Program (TARP). Given the urgent nature of this crisis, we urge you to immediately use these existing authorities to extend loans to the domestic automakers and ensure their continued operations until the 111th Congress can convene on January 6, 2009 and pass legislation relating to the long term restructuring and viability of the domestic automobile industry.

Sincerely,

Senator Carl Levin (MI)

Senator Debbie Stabenow (MI)

Representative Bart Stupak (MI-01)

Representative Peter Hoekstra (MI-02)

Representative Vernon Ehlers (MI-03)

Representative Dave Camp (MI-04)

Representative Dale E. Kildee (MI-05)

Representative Fred Upton (MI-06)

Representative Michael J. Rogers (MI-08)

Representative Joseph Knollenberg (MI-09)

Representative Candice Miller (MI-10)

Representative Thaddeus G. McCotter (MI-11)

Representative Sander M. Levin (MI-12)

Representative Carolyn C. Kilpatrick (MI-13)

Representative John D. Dingell (MI-15)