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Pelosi, Reid eye help for 'Big 3'

Seek funds for automakers

By Jon Ward (Contact) | Sunday, November 9, 2008

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The top two congressional leaders Saturday asked the Bush administration to examine whether the $700 billion economic rescue package passed last month gives the Treasury Department authority to help ailing U.S. automakers, claiming tens of thousands of jobs are in peril.

Senate Majority Leader Harry Reid, Nevada Democrat, and House Speaker Nancy Pelosi, California Democrat, made the request in a letter sent Saturday to Treasury Secretary Henry M. Paulson Jr.

"Our nation's automobile industry - the heart of our manufacturing sector - and the jobs of tens of thousands of American workers are at risk," the letter said. "Friday's news of the automobile industry's record low sales figures only reaffirm the need for urgent action."

The letter from Mr. Reid and Mrs. Pelosi expressed some uncertainty about whether the Emergency Economic Stabilization Act of 2008 (EESA) does in fact give the government authority to extend loans or give any other type of assistance to the "Big Three" U.S. automakers: General Motors, Ford Motor Co. and Chrysler, LLC.

Instead of demanding that the government take action, the Democratic leaders asked Mr. Paulson to "review the feasibility" of such an approach.

The White House, however, has insisted that it does not have authority under the rescue plan to help automakers. It pointed Friday to a $25 billion loan program passed by Congress in September and being run out of the Department of Energy that gives automakers money to produce more fuel-efficient vehicles.

"If Congress has any interest in going beyond that, that's a decision that they're going to have to make," White House deputy press secretary Tony Fratto said Friday. "We don't have the authority to do that."

Mr. Fratto, reached by e-mail Saturday to comment on the Pelosi-Reid letter, declined to add to those comments.

Pressure has been steadily mounting for some sort of government aid to the Big Three, and it increased after GM and Ford announced on Friday enormous third-quarter losses and said they are running out of cash.

GM reported a $2.5 billion loss in the third quarter, and Ford said it had lost $129 million. GM now has lost $57 billion since the beginning of 2005 and has about $16 billion in reserve, just a few billion above what is needed to continue operations. Ford, meanwhile, has lost $24.5 billion since 2006, but has close to $30 billion in reserve.

Big Three executives and United Auto Workers President Ron Gettelfinger met with Mr. Reid and Mrs. Pelosi on Thursday and requested $50 billion in loans to help them dole out health care to about 780,000 retirees and their dependents.

President-elect Barack Obama on Friday said in his first press conference that he "would like to see the administration do everything it can to accelerate the retooling assistance that Congress has already enacted."

Rep. Sander M. Levin, Michigan Democrat, has said that House leaders are studying whether they can amend the $700 billion EESA to enable the government to help the automakers.

But $250 billion from the rescue plan is already set aside to purchase equity shares in U.S. banks, and much of the rest of the money will be used for the Troubled Assets Relief Program (TARP), through which the Treasury will buy bad debt from financial institutions and hopefully hold onto the assets long enough so they can regain value and then be sold back into the market.

Mr. Reid and Mrs. Pelosi, however, argued to Mr. Paulson in their letter that under the EESA, "Congress granted you broad discretion to purchase, or make commitments to purchase, financial instruments you determine necessary to restore financial market stability."

"A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector's work force," they said.