WASHINGTON -- A group of Republican senators today proposed legislation that would block release of another $350 billion of federal money to rescue the nations financial institutions. The funds also would be the source of further emergency loans to the Detroit 3, if needed.
The senators said they oppose the second wave of money, in part, because a previous allocation of $350 billion included loans to General Motors and Chrysler LLC.
The rescue program really has devolved into a slush fund for the administration, said Sen. David Vitter, R-La., citing the automaker loans.
The Bush administration initially opposed use of the financial rescue money for the auto industry. But when Congress failed last Dec. 11 to approve a measure that would have used other funding for the emergency loans, the administration reversed course.
On Dec. 19, President George W. Bush announced that his administration would provide $13.4 billion to GM and $4 billion to Chrysler to keep them from running out of cash. The final $4 billion to GM depends on congressional agreement to release the second $350 billion.
Senate Republicans were successful in blocking the loans to GM and Chrysler. But in the new Congress, Democrats have gained as many as eight Senate seats.
Chrysler executives say they need an additional $3 billion from the federal government. Ford Motor Co. says it will want access to as much as $9 billion in a federal line of credit if market conditions get significantly worse.
Congress, the outgoing Bush administration and the incoming Obama administration have worked themselves into a political box over the rescue money.
After lawmakers were told last September that the nation was on the verge of a financial meltdown, Congress approved $700 billion in rescue aid, mainly so the Treasury Department could buy troubled assets from banks. But Congress held back half the money.
This week, Bush -- responding to a request from President-elect Barack Obama -- asked lawmakers to release the second $350 billion. The original law set up special procedures for the release.
If Congress does not reject the request, the money would be released. If Congress does reject it, the president can veto the resolution of disapproval.
Top aides to Obama, who takes office Tuesday, have lobbied lawmakers against blocking the money. House Majority Leader Steny Hoyer, D-Md., told reporters today that he thinks there is only a small chance the money wont be released.
Separately, the House is considering a bill that would set new restrictions on future rescue funds. It would require some money to be spent to prevent home foreclosures. The bill also would alter conditions the Bush administration placed on the loans to GM and Chrysler.
If the House approves the bill, its fate in the Senate is uncertain.