The Senate’s top Republican poured cold water on plans for a $15 billion taxpayer bailout of Detroit’s Big Three on Tuesday, as his Democratic counterpart said hopes for quick passage of the emergency funding bill appeared to be slipping away.
Senate Minority Leader Mitch McConnell, Kentucky Republican, said the bill drafted largely by Capitol Hill Democrats “does not go nearly far enough” to force the car companies and their unions to make fundamental changes needed to restore the industry’s long-term health.
General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking a combined $34 billion in taxpayer loans and credit lines to deal with what they say is the catastrophic impact on sales of the global credit crunch. GM and Chrysler warn they could go bankrupt in the next few weeks if billions of dollars in federal aid are not forthcoming.
The draft bill delivered to the White House on Monday afternoon provides about $15 billion in short-term federal financing, designed to keep the beleaguered firms in business until the incoming Obama administration can tackle Detroit’s long-term problems.
The bill would create a federal overseer for the carmakers, give the government the right to acquire stock in the companies, and reserve the right to recall the loans early if the three companies and their unions, dealers, suppliers and investors fail to make major concessions.
Senate Majority Leader Harry Reid, Nevada Democrat, after first predicting a quick deal with the White House, said Tuesday afternoon it was “very, very unlikely” the Senate would vote on a bill Tuesday and raised the prospect lawmakers may have to work into the weekend to overcome opposition from the Republican minority.
“We cannot let a few people stop us from doing the people’s business,” Mr. Reid said.
House Democratic leaders said talks with the White House were progressing and had come a long way in the past week, when there were real questions whether the federal government would act.
“There do not appear to me to be differences in principle of significant nature to blow this thing up,” said Rep. Barney Frank, Massachusetts Democrat and chairman of the House Financial Services Committee.
House Majority Leader Steny Hoyer, Maryland Democrat, stopped short of threatening to keep lawmakers in session another week if the Senate fails to act by the weekend.
“I don’t want to anticipate next week … but we are prepared to get this done,” he said.
But Mr. McConnell’s comments point up the political hurdles still facing the bailout as Congress tries to wrap up this week’s lame-duck session.
Sen. Bob Corker, Tennessee Republican and a member of the Senate Banking Committee, said in an interview that Congress and the Bush administration were “blowing a big opportunity” to fundamentally reform the car companies’ management, labor and financial structures. He said that based on what he had seen of the compromise bill, “I cannot support it today.”
Mr. Corker said he would demand that bondholders agree in advance to a 70 percent write-down of their holdings and the United Auto Workers accept major wage and benefit cuts before any tax dollars are committed. Mr. Corker said he already had met with bondholders and union officials on aspects of his alternative plan.
“I understand the White House wants to kick the can down the road to the next administration,” he said, “but I think that means we will be missing a major opportunity that only comes along only so often.”
Mr. Frank said one of the remaining sticking points was a provision backed by congressional Democrats to give the government a veto on Big Three transactions and investments over $25 million while the car companies are receiving taxpayer dollars.
The pressure on Congress to act grew Tuesday with the release of a letter by Federal Reserve Chairman Ben S. Bernanke saying that the central bank would not step in to help Detroit.
“The Federal Reserve would be extremely reluctant to extend credit where Congress has actively considered providing assistance, but after due consideration, has decided not to act,” Mr. Bernanke wrote in a Dec. 5 letter to Sen. Christopher Dodd, Connecticut Democrat and chairman of the Senate Banking Committee. Mr. Dodd and other top Capitol Hill Democrats have pressed both the Federal Reserve and the Treasury Department to aid the Big Three, but both have resisted.
“I believe that American manufacturing is just as important to our nation’s economy as a healthy financial sector,” Mr. Dodd said.
Mr. McConnell acknowledged that the U.S. auto industry is in deep trouble, noting that his own state has both U.S. and foreign auto plants.
But he said on the Senate floor it was “unfair to taxpayers” to approve even the interim bailout plan without clear commitments from the companies and from the United Auto Workers to change their ways.
He said the bill should require the government to recall the loans early if the industry fails to act, not just leave it as an option.
The bill also does not address the companies’ high labor, benefits and pension costs, Mr. McConnell added, and includes several provisions he said were designed to protect the UAW from making more concessions.
Mr. Reid argued that it was vital to act to preserve an industry that employs directly or indirectly 2.5 million people. He also noted that the stock market soared Monday on news that Congress and the White House were nearing a deal on the auto industry.
“The American people want us to resolve this issue,” he said.
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