Prospect for auto bailout dims
WASHINGTON (Reuters) - Chances dimmed that a last-minute plan being crafted by Republican senators, with White House support, to provide $25 billion to bail out U.S. automakers would receive enough backing from Democrats to pass before the end of this week.
As the hours ticked down on this year's legislative session, Democratic leadership expressed deep skepticism the talks would lead to a compromise acceptable to all parties.
Congress has at most two days remaining in its post-election session. Without a deal in that time, any bailout is likely to have to wait until the new Obama administration takes over in January.
"I won't say it's completely over. I'm still having conversations with people. But it doesn't look good," Sen. Robert Bennett, a Utah Republican, said of chances lawmakers would strike a deal that could pass.
Failure to craft a deal carries the risk that one or more of the U.S. automakers -- General Motors Corp, Ford Motor Co or Chrysler LLC -- could be forced into bankruptcy.
Senate Minority Leader Mitch McConnell said in remarks on the Senate floor that the compromise "is the only proposal being considered" that has any chance of becoming law now.
The approach, spearheaded by Republicans Christopher Bond of Missouri and George Voinovich of Ohio, would amend a plan that extended $25 billion approved in September for helping Detroit retool factories and make more fuel-efficient cars.
A number of strings attached to the retooling money would have to be cut or reworked to make it available immediately for operational and other pressing needs.
"We've made great progress. We're down to wording challenges," Bond said in remarks on the Senate floor Wednesday night.
CEO HOT SEAT
The rush to reach a deal comes after U.S. auto executives spent their second straight day on Capitol Hill pleading for $25 billion in government aid.
The day's hearings, before the House Financial Services Committee, got off to a rousing start when panel Chairman Barney Frank asked how the government could justify a bailout for banks and insurers, but not the automakers.
"Frankly, there seems to me to be an inherent cultural bias," Frank said. "Aid to blue-collar employees is being judged by a standard different than white-collar employees."
The weakened economy and global credit crisis pushed the U.S. government into bailing out companies including insurer American International Group Inc, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.
Congressional Democrats have proposed using money from the $700 billion bailout package for banks to aid the automakers, but the Bush administration -- with only weeks left before it cedes power to President-elect Barack Obama -- has expressed opposition.
In addition, other opponents of the bailout have argued that reorganization under bankruptcy would be the best solution to the carmakers' problems.
Senate Democratic Majority Leader Harry Reid said he wished "we could move forward" on a bill, but said that legislators were still trying to find a bill that could be sure to pass.
However, the U.S. House is scheduled to leave Washington on Thursday for the year and "we have to face reality," the Senate leader said. "We'll work to see what we can get done in the next 12 hours."
Other legislators have said some kind of deal is coming.
McConnell said a compromise is the only way for legislation to become law. He proposed to tap $25 billion of auto retooling loans already approved by Congress but not yet disbursed by the Energy Department -- an approach supported by the White House.
White House spokeswoman Dana Perino said the administration remains opposed to giving automakers money from the $700 billion financial rescue package, as some Democrats have urged. "There's no appetite for that," she said.
But changing the existing legislation could have one key opponent -- Barney Frank.
Frank, champion of a bailout plan similar to the one stalled in the Senate, said amending the retooling legislation, as he understood it, would meet resistance in the House.
"It would be sending the wrong signal to rescind the environmental restrictions," the Massachusetts Democrat said of core provisions in the retooling bill.
WHEELIN' AND DEALIN'
Earlier on Wednesday, Levin urged the House committee not to let differing views about the source of U.S. automaker loans hold up the aid.
"Are we going to permit a difference over the source of these loans to destroy an opportunity to help an industry so essential to this country?" Levin asked.
Voinovich, whose state could be devastated by a collapse of the U.S. auto industry, also voiced optimism that a deal could be struck.
"We are having a lot of discussions with the Democrats," the Ohio Republican said, noting a growing consensus "of getting something done so we don't lose General Motors."
Investors showed their concerns about the legislative wrangling, as GM and Ford shares fell on the uncertainty of the bill's passage. GM closed down nearly 10 percent at $2.79 after hitting a 66-year low of $2.52, and Ford was off 25 percent at $1.26, after hitting a 26-year low of $1.21.
If the bailout deal is reached, Chrysler said it hopes to revive merger talks with GM, according to a story in the Financial Times.
Connecticut Democrat Christopher Dodd, chairman of the Senate Banking Committee, said it looked unlikely that Congress will come to agreement this week on an assistance package for the auto industry.
"I'm anxious to see something happen," he told reporters after a committee hearing on a separate issue. "But frankly, the idea that there's going to be a bill, I think, is remote."