Paulson: Don't use bailout money for automakers
By JULIE HIRSCHFELD DAVIS
Associated Press
November 19, 2008
WASHINGTON (AP) -- Treasury Secretary Henry Paulson told Congress on Tuesday that the administration remains firmly opposed to dipping into the government's $700 billion financial bailout fund for a $25 billion rescue package for Detroit's Big Three automakers, no matter how badly they need the help.
"There are other ways" to help them, Paulson told the House Financial Services Committee as the bailout bill clung to life support on Capitol Hill.
Committee members grilled Paulson on the administration's stance that the $25 billion must come from separate legislation passed in September that Congress designed specifically to help auto manufacturers retool their factories so they can make more fuel-efficient vehicles.
The $700 billion bailout plan enacted by Congress in October and signed into law by President George W. Bush did not envision that the program would be used to help rescue nonfinancial companies, Paulson said. "I believe the auto companies fall outside of that purpose."
At the same time, he testified, "I think it would be not a good thing, it would be something to be avoided, having one of the auto companies fail, particularly during this period of time."
Paulson said that solving the financial problems of the automakers should be done in a way "that leads to long-term sustainable viability" for the industry.
Auto executives, backed by leading Democrats, insist they need another $25 billion in emergency bridge loans -- on top of the $25 billion already approved and being administered by the Energy Department -- to avert a collapse of one or more of their companies. That would bring the total federal help for the industry to $50 billion this year.
Paulson cited this Energy Department program several times. "I urge you to modify that" to help automakers, he said.
But Rep. Paul Kanjorski, D-Pa., told Paulson, "It seems to me when you're treating a disease, you don't decide where the disease came from. You decide when is the prognosis, the likely prognosis. And then you take action."
Kanjorski said there was "a lack of confidence both in this body and in the general population" over the government's handling of the crisis. "They want some idea, do we have a plan? Where are we going? To say turning a corner, really, is not terribly significant."
The auto executives, along with the head of the United Auto Workers union, were making their case at a hearing before the Senate Banking Committee as auto bailout backers hunted the votes necessary to pass the plan in a postelection session. Aides in both parties and lobbyists tracking the plan privately acknowledge they are far short.
Karen Majewski, mayor of Hamtramck, Mich., said police, fire and public works departments would face major cuts if they lost tax revenues from GM and American Axle plants in her city. "We're talking about the lifeblood of our city," she said.
She was among local officials from cities with auto plants making the rounds on Capitol Hill on Tuesday, lobbying for the $25 billion in auto-industry bridge loans.
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