- The Washington Times - Wednesday, November 19, 2008

The Bush administration has only about $60 billion from its massive bank bailout fund left to spend this year, and Treasury Secretary Henry M. Paulson Jr. argued strenuously Tuesday that the money should be kept in reserve for any near-term emergency such as another bank failure.

The news dealt a blow to the nation’s automakers, whose top executives got a chilly reception when they appeared on Capitol Hill to appeal for a share of the $700 billion fund.

“Just reading the tea leaves around here, my sense is that nothing is going to happen this week,” Sen. Bob Corker, Tennessee Republican, told the executives from General Motors Corp., Ford Motor Co. and Chrysler LLC, who had warned that the global credit crunch could drag down the entire American auto industry.

Mr. Corker described the rare, coordinated plea for government aid from the executives as the “beginning of a loan application” that won’t be acted on until the Obama administration takes office next year. The legislation approving the finance industry bailout divided the total into two portions of $350 billion, and Mr. Paulson signaled Monday that he would not touch the second $350 billion, leaving it for the incoming Obama administration to spend as it sees fit.

Of the first share, Treasury figures show $125 billion has gone to recapitalize nine big banks; another $125 billion went to recapitalize smaller banks; and $40 billion has gone to sustain the insurance giant American International Group (AIG). That leaves only $60 billion on hand.

“The purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties,” Mr. Paulson told the House Financial Services Committee. “If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract. So early last week, we concluded it was only prudent to reserve our capacity, maintaining not only our flexibility but that of the next administration.”

The Big Three chiefs — Ford President Alan R. Mulally, General Motors Chief Executive Offficer Rick Wagoner and Chrysler Chairman Robert Nardelli — rejected charges at a later Senate Banking, Housing and Urban Affairs Committee hearing that the U.S. auto industry was the victim of its own mismanagement, marketing errors and high cost structure, saying their efforts to transform their companies had been undermined by the international banking crisis that has emptied showrooms and forced dealerships across the country to shut down.

Mr. Nardelli warned that the bankruptcy of any of the Big Three could drag them all down, given their linked supplier and financing networks.

Mr. Wagoner said the cost of failure to the U.S. economy would be “catastrophic.”

The Bush administration and a large number of Capitol Hill Republicans say the beleaguered industry can tap into an existing $25 billion loan program through the Energy Department, but leading Democrats say they would prefer to use both the loans and more money from the giant new bank bailout fund to assist the industry.

Sen. Carl Levin, Michigan Democrat and lead author of a bailout bill, said the source of the money was less important than that help be made available. He noted that the Republican and Democratic leaders of both chambers have expressed interest in doing something to ease Detroit’s plight, as has President-elect Barack Obama.

“There’s a common goal, which is not always the case around here,” Mr. Levin said after emerging from a Senate Democratic caucus. “How we get there is not as important as getting there.”

But Senate Republicans, who appear to have the votes to block a more ambitious auto package, argued that the Wall Street bailout fund was intended to ease the nation’s credit crunch, not to help out every business that runs into trouble.

“I’m worried where all this could be heading,” said Sen. John Cornyn, Texas Republican.

Shortly before the hearing began, about 20 mayors and city managers from across the country gathered on Capitol Hill to back the lobbying blitz. The city officials, who mostly hail from cities with auto manufacturing plants, said their local economies would collapse unless Washington intervened.

Lansing, Mich., Mayor Virg Bernero called his plea to help his state’s carmakers “the most important mission of my life.”

“I’m proud of our auto industry, and frankly I’m tired of seeing it kicked around,” said Mr. Bernero, whose city includes about 6,000 auto manufacturing jobs. “This is a real crisis. This is an economic [Hurricane] Katrina.”

Arlington, Texas, Mayor Robert Cluck said the overall sour economy — not internal problems with automakers or organized labor — was to blame for the industry’s troubles.

“This is not a political issue. This is not about Democrats versus Republicans. This is about America. This is about our communities,” Mr. Cluck said.

The Senate banking panel hearing was packed with dealers and auto industry lobbyists. An overflow room was set up in a second Senate office building to view the proceedings.

“If I’d known there was going to be so much interest, I would have held the hearing in RFK Stadium,” joked Committee Chairman Sen. Christopher J. Dodd, Connecticut Democrat.

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