House Democratic leaders said earlier in the day that talks with the White House had come a long way in the past week, when it was questionable whether the federal government would act.
“There do not appear to me to be differences in principle of significant nature to blow this thing up,” said House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, emerging from an hourlong briefing for House Democrats on the automakers bill at midafternoon Tuesday.
Mr. Frank said one of the remaining sticking points was a provision backed by congressional Democrats to give the government a veto on Big Three transactions and investments over $25 million while the car companies are receiving taxpayer dollars. It was not certain Tuesday night whether that provision was in the compromise proposal.
Mr. Reid argued that it was vital to act to preserve an industry that employs directly or indirectly 2.5 million people. He also noted that the stock market soared Monday on news that Congress and the White House were nearing a deal on the auto industry.
The pressure on Congress to act grew Tuesday with the release of a letter by Federal Reserve Chairman Ben S. Bernanke saying that the central bank would not step in to help Detroit.
“The Federal Reserve would be extremely reluctant to extend credit where Congress has actively considered providing assistance, but after due consideration, has decided not to act,” Mr. Bernanke wrote in a Dec. 5 letter to Sen. Christopher J. Dodd of Connecticut, chairman of the Senate Banking, Housing and Urban Affairs Committee. Mr. Dodd and other top Capitol Hill Democrats have pressed both the Federal Reserve and the Treasury Department to aid the Big Three, but both have resisted.
“I believe that American manufacturing is just as important to our nation’s economy as a healthy financial sector,” Mr. Dodd said.
Mr. McConnell’s comments point to political hurdles for a bailout as Congress tries to wrap up this week’s lame-duck session.
Sen. Bob Corker, Tennessee Republican and member of the Senate banking committee, said in an interview that Congress and the Bush administration were “blowing a big opportunity” to fundamentally reform the car companies’ management, labor and financial structures.
Mr. Corker said he would demand that bondholders agree in advance to a 70 percent write-down of their holdings and that the UAW accepts major wage and benefit cuts before any tax dollars are committed. The senator said he had already met with bondholders and union officials on aspects of his alternative plan.
“I understand the White House wants to kick the can down the road to the next administration,” he said, “but I think that means we will be missing a major opportunity that comes along only so often.”
• Jon Ward contributed to this report.