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Bush, Democrats OK $15 billion for Big 3
The White House and senior congressional Democrats reached an agreement on the outlines of a $15 billion taxpayer bailout plan for troubled Detroit automakers General Motors Corp. and Chrysler LLC, though the bill to implement the rescue package still faces an uncertain reception on Capitol Hill.
Administration sources said the bill, which would create a “car czar” appointed by President Bush to oversee a major restructuring of the beleaguered Big Three, could be ready for a vote in Congress as early as Wednesday. The deal sets a deadline of March 31 for the companies to offer a long-term plan for reform, with the czar having the authority to force the companies to declare bankruptcy if they fail to act.
The deal was announced at the end of a day when leading Senate Republicans expressed growing unhappiness with the developing accord and congressional Democrats scrambled to keep the bailout package on track.
Senate Minority Leader Mitch McConnell, Kentucky Republican, said the draft bill circulated over the weekend by Capitol Hill Democrats “does not go nearly far enough” to force the car companies and their union to make fundamental changes needed to restore the industry’s long-term health.
Another top Republican senator, briefing reporters on background, said opposition has been raised within the Republican caucus to the short-term bailout and that the White House had applied “zero” pressure on Republican lawmakers to support the bill.
“I’m prepared to hold it. Some major changes need to happen before it goes through,” said the senator, arguing that the legislation does not have enough protections for taxpayers.
Senate Majority Leader Harry Reid, Nevada Democrat at first predicted a quick deal with the White House but said lawmakers may have to work into the weekend to overcome opposition from the Republican minority.
“We cannot let a few people stop us from doing the people’s business,” Mr. Reid said.
General Motors, Ford Motor Co. and Chrysler had been seeking a combined $34 billion in taxpayer loans and credit lines to deal with what they say are the catastrophic impacts on sales of the global credit crunch. GM and Chrysler warned last week that they could go bankrupt in the next few weeks if billions of dollars in federal aid are not forthcoming.
The rescue package provides about $15 billion in federal loans and credit lines to GM and Chrysler, designed to keep the beleaguered firms in business until the incoming Obama administration can tackle Detroit’s long-term problems.
Ford, considered the healthiest of the Big Three automakers, had been seeking $9 billion in a standby credit line but had not sought immediate financing.
The Bush administration will consult with the transition team of President-elect Barack Obama in selecting the new federal auto overseer. Other pieces of the Democratic proposal would give the government the right to acquire shares in the bailed-out firms and the power to recall the loans early if the three companies, their unions, dealers, suppliers and investors fail to make major concessions.
But Mr. McConnell and other Republicans said the measure does not address the companies’ high costs of labor, benefits and pensions, and includes several provisions apparently designed to protect the United Auto Workers.
It is “unfair to taxpayers” to approve even the interim bailout plan without clear commitments from the companies and from the UAW to change their ways, he said.
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.
About the Author
Steven A Miller
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Raised in Northern Virginia, David R. Sands received an undergraduate degree from the University of Virginia and a master’s degree from the Fletcher School of Law and Diplomacy at Tufts University. He worked as a reporter for several Washington-area business publications before joining The Washington Times.
At The Times, Mr. Sands has covered numerous beats, including international trade, banking, politics ...
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