By Lori Montgomery and Michael D. Shear
Washington Post Staff Writers
Tuesday, November 11, 2008
President-elect Barack Obama yesterday urged President Bush to support immediate aid for struggling automakers and back a new stimulus package, even as congressional Democrats began drafting legislation to give the Detroit automakers quick access to $25 billion by adding them to the Treasury Department's $700 billion economic rescue program.
Bush, speaking privately to Obama during their first Oval Office meeting, repeated his administration's stand that he might support quick action on those bills if Democratic leaders drop their opposition to a Colombia trade agreement that Bush supports, according to people familiar with the discussions.
The discussions raised the stakes for a lame-duck session of Congress that could begin next week and came as fears about General Motors' financial condition yesterday pushed the company's stock price to its lowest level in about 60 years. Obama said last week that passage of the economic stimulus package and help for American car companies are his top priorities. The Bush administration has steadfastly pushed for trade deals before he leaves office.
Congress could consider the auto measure as soon as next week, when lawmakers are scheduled to return to Washington. Yesterday, in an urgent bipartisan appeal, all 15 House members and both senators from Michigan sent a letter asking the Bush administration to include the auto industry in the Treasury program on its own initiative or to work with Congress to modify the program.
"There's an urgent crisis. It's a national issue. If the administration won't act, we'll have to. But they should act," said Rep. Sander M. Levin (D-Mich.).
The entire auto industry is suffering these days, but GM has been particularly hard hit as sales have slowed and credit has tightened. Once the world's largest automaker, the company said yesterday that it was in danger of running out of cash next year. The company is taking a series of steps to conserve cash, including cutting production and laying off 5,500 more factory workers. Yet one closely followed Deutsche Bank analyst cut his forecast on GM's share price to zero, saying that even if GM manages to avert bankruptcy, "we believe that the company's future path is likely to be bankruptcy-like."
The gloomy assessment and others like it helped knock down GM's shares by nearly 23 percent, to $3.36.
So far, administration officials have resisted calls to include the Detroit automakers in the Treasury's bailout program, which was conceived to stabilize banks and other financial institutions reeling from the global credit crisis. Opening the program to the auto industry would expand the government's role in private enterprise far beyond the banking sector, and analysts warn that it could prompt a long line of companies from other industries to show up in Washington with their hands out.
Administration officials have pointed instead to $25 billion in low-interest loans recently approved by Congress as a source of quick help for the car companies. Yesterday, White House press secretary Dana Perino told reporters that the White House would be open to legislation that removes bureaucratic roadblocks slowing the release of that money.
"Congress is going to come back into town next week," Perino said. "If it wants to do anything in addition for the automakers, we'll certainly listen to ideas they have on how to accelerate the loans to viable companies."
Democrats said the loan program is intended to provide long-term assistance to the car companies to retool their factories to produce more fuel-efficient vehicles. They said it was not designed to provide urgent relief from a crisis in consumer confidence that has pushed auto sales to their lowest level in two decades.
"GM has estimated maybe they'd get a billion or two at most next year" from the previously approved loan program, Levin said. "It wouldn't provide for the infusion of capital that's absolutely necessary for them to bridge to the future."
Democrats want the Bush administration to approve an additional $25 billion in loans from the Treasury program, bringing total federal assistance to the car companies to $50 billion. In a letter sent yesterday to Treasury Secretary Henry M. Paulson Jr., Levin and other Michigan lawmakers urged Paulson "in the strongest possible terms to use your authority under the Emergency Economic Stabilization Act (EESA) or other statutes to immediately address a significant and systemic threat to the U.S. economy and provide emergency assistance to the domestic automobile industry."
Given that one of every 10 U.S. jobs depends in some way on the auto industry, the letter says, helping Detroit is "well within the broad mandate of the Treasury Department to promote stable economic growth. Given the urgency of the situation, we ask that you work with us in the coming days to provide immediate loan support to the domestic auto industry, including, if necessary," by amending the emergency stabilization act.
The letter followed a similar entreaty to Paulson over the weekend by House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Harry M. Reid (D-Nev.).
Amending the Treasury program would require action by both chambers of Congress. As of yesterday, Senate leaders planned to convene Nov. 17, but House leaders had yet to decide whether to summon lawmakers back to work. Although most House members will be in Washington next week to choose the leadership for the next Congress, retiring members and those who lost their seats on election night will not return unless Pelosi calls them back.
House leaders have said they are unlikely to convene the House for legislative business unless the Bush administration agrees to negotiate a spending package to revive the broader economy. As of yesterday, although the two sides continued to talk, there was no deal. But if the Senate approves a $61 billion economic stimulus package that the House passed in September, the House might return to work on that legislation, creating an opportunity to help the automakers.
Michigan lawmakers from both parties said failure to act would be devastating, not only to the car companies but also to the nation.
"Our nation's leaders must not turn a deaf ear toward helping the nation's automakers," Rep. Fred Upton (R-Mich.), co-chairman of the Congressional Auto Caucus, said in a written statement. "We can either stand by and do nothing, watching tens of thousands of jobs in Michigan and Middle America evaporate, or we can meet our challenges head on."
Given the vast sums of money the Bush administration has provided to Wall Street, including a rapidly growing bailout for insurance giant American International Group, Levin said the administration had no excuse not to act.
"How much are we giving AIG? $150 billion? And we're talking about $25 billion for what has been the major industry of this country," Levin said. "If there's a will, there's a way. So now it's up to the administration to respond. If they don't, we'll act."
Staff writer Kendra Marr contributed to this report.