Reid to lower expectations on auto bailout

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.

At a hearing of his House Financial Services Committee later, Frank pointedly suggested that a congressional bias exists to the extent that lawmakers seem more inclined to intervene to help white-collar bankers than blue-collar auto workers.

But Alabama Rep. Spencer Bachus, R-Ala., said the bailout would only “push the problem further down the path.”

Facing a less-than-receptive greeting in the Senate Tuesday, General Motors Corp. CEO Rick Wagoner warned that the failure of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the country.

“This is all about a lot more than just Detroit. It’s about saving the U.S. economy from a catastrophic collapse,” Wagoner said.

A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it currently lacks the support to advance.

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