- The Washington Times - Saturday, December 6, 2008

President Bush, acknowledging for the first time publicly that the economy has slipped into a recession, Friday urged Congress to pass a federal rescue plan in the next week to prevent Detroit’s Big Three from failing.

Mr. Bush and top congressional Democrats both seized on a grim new report on unemployment to try to stoke lukewarm support on Capitol Hill for a federal rescue plan for General Motors Inc., Ford Motor Co. and Chrysler LLC.

The White House and Capitol Hill were working Friday night on finding a way around the impasse they face over the best plan to bail out the companies.

“I am concerned about the viability of the auto companies,” Mr. Bush said. “Likewise, I am concerned about taxpayer money being provided to those companies that may not survive.”

Mr. Bush said it was “important that Congress act next week on this plan, and it is important to make sure that taxpayers’ money be paid back, if any is given to the companies.”

After days of lawmakers fearing that a deal could not be made, congressional leaders said they would call lawmakers back into session.

“I expect that legislation will be brought up for a vote in the House next week,” House Speaker Nancy Pelosi, California Republican, said in a statement late Friday.

Mr. Bush’s brief statement Friday was notable for his first use of the word “recession,” blaming the sharp downturn on “severe problems in our housing, credit and financial markets.” His use of the word came three days after the private National Bureau of Economic Research formally declared that the U.S. economy had fallen into a recession in December 2007.

Top executives from Detroit’s Big Three automakers received a marginally warmer reception Friday on the second day for their Capitol Hill lobbying blitz for a federal bailout, their case bolstered by the bleak economic news.

Both House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, and ranking Republican Rep. Spencer Bachus of Alabama expressed concern that sending the auto executives home empty-handed would deliver a body blow to the larger economy.

“For us to do nothing, to allow bankruptcies and failures in one or three of these companies in the midst of the worst credit crisis and the unemployment situation that we’ve had in 70 years, would be a disaster,” Mr. Frank said.

Mr. Bachus agreed that the failure of a major U.S. car company now would be “detrimental” to the U.S. economy, but said he could only support “limited transitional assistance” to allow the beleaguered companies to return to solvency and profitability.

Mr. Frank, noting the political unpopularity of the bailout plan and the sharp differences over how to structure it, said at the conclusion of the nearly six-hour hearing, “If we’re lucky, we’ll come out with a bill that nobody likes,” arguing that such a bill is the only one with a chance of passage.

There remains widespread opposition on Capitol Hill to an industry bailout, with many saying the companies’ woes are tied not to the global credit crunch but to their own management, marketing, labor and cost mistakes.

The three U.S. auto companies are seeking a combined $34 billion in loans and credit lines from the federal government. GM and Chrysler say they need $11 billion within weeks just to avoid an immediate collapse.

Leading congressional Democrats, including Mrs. Pelosi and Senate banking panel Chairman Christopher J. Dodd of Connecticut, have urged the Bush administration to tap the $700 billion Wall Street bailout fund to help the Big Three, a step Treasury Secretary Henry M. Paulson Jr. has rejected.

The Associated Press reported that Mrs. Pelosi and White House Chief of Staff Joshua B. Bolten spoke by phone Friday.

Mr. Bush on Friday again proposed letting the car companies use an existing $25 billion Department of Energy program to promote fuel-efficient cars to bankroll the bailout - an idea Mrs. Pelosi and environmental groups reject.

Other proposals include offering the carmakers a smaller “bridge loan” to let the incoming Obama administration work on a long-range plan. Others say a bankruptcy filing — perhaps made quicker with federal aid — is preferable to yet another industry bailout.

The auto companies and the United Auto Workers union argue that even an expedited bankruptcy would be impractical, saying customers will instantly desert a company that makes such a filing.

“I think everything should be on the table, but bankruptcy should be the last option,” Sen. Jon Tester, Montana Democrat, told MSNBC.

President-elect Barack Obama has said he supports aid to Detroit but opposes a “blank check” to the automakers if they fail to produce a long-term plan to return to profitability.

But he has declined to enter into the frantic negotiations on Capitol Hill over how to fashion a bailout, a stance that has left some congressional Democrats frustrated.

Mr. Obama “is going to have to be more assertive than he’s been,” Mr. Frank told a group of consumer advocates earlier this week.

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