Reid to lower expectations on auto bailout

By Ken Thomas ASSOCIATED PRESS | Wednesday, November 19, 2008

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UPDATED:

WASHINGTON (AP) – The top Senate Democrat sought Wednesday to lower expectations for legislation this week to help endangered carmakers, saying it would be the Bush administration's job to save the industry if Congress doesn't.

"No one should be overly concerned," if Congress can't agree on a bill to speed $25 billion in new loans to the industry, Sen. Harry Reid said. But the Nevada Democrat also said he still hopes that lawmakers can strike an elusive deal on emergency assistance in this week's lame duck session.

"If not," Reid told Senate colleagues, "it will still be up to the White House and the Treasury Department to take the steps that I believe are necessary and warranted."

The rescue plan appeared stalled on Capitol Hill, even as the heads of General Motors, Ford and Chrysler returned for a second day to plead for relief and as their congressional backers urged colleagues not to punish them for past mistakes.

President George W. Bush and Republicans in Congress have been reluctant to use the Treasury Department's $700 billion financial bailout program to finance the loans. And White House press secretary Dana Perino has said Congress should draw the funds from an Energy Department program established by law last year to encourage production of fuel-efficient cars.

Earlier Wednesday, Sen. Richard Shelby, the senior Republican on the Banking Committee, said he did not believe there would be a turnaround in industry until its top management is ousted and its manufacturing operations are revamped.

"I don't think they have immediate plans to change their model, which is a model of failure," Shelby said. He said he thinks a large part of any such bailout would amount to "life support" for the automakers.

"I believe their best option would be some type of Chapter 11 bankruptcy," he said. "These leaders have been failures and they need to go."

Rep. Barney Frank, D-Mass., disagreed with that, saying choosing the bankruptcy option would likely mean abrogation of labor contracts. "We already have too much union busting," Frank said.

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