U.S. & World News

WASHINGTON (AP) ― A key House Democrat is writing legislation that would send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid are pressing for quick passage of an auto bailout during a postelection session of Congress that begins Tuesday.

The legislation being drafted by Democratic Rep. Barney Frank, chairman of the Financial Services Committee, would dip into the $700 billion Wall Street rescue money approved by Congress last month for the auto aid. President Bush is cool to that idea, although the White House says he is open to helping the troubled industry.

However, Treasury Secretary Henry Paulson, calling autos a "critical industry in this country" earlier Wednesday, said the government's $700 billion financial rescue program wasn't designed to help automakers.

Asked about Democratic congressional leaders' plan to rush financial aid to the industry, Paulson cautioned that "any solution has got to be leading to long-term viability" for auto companies.

He said Congress could try to make funding more available to the auto industry as part of a $25 billion loan program approved in September to develop fuel-efficient vehicles.

House Speaker Nancy Pelosi wants Congress to support a financial bailout for the troubled U.S. auto industry, which is suffering under the weight of poor sales, tight credit and a sputtering economy.

Pelosi, D-Calif., said Tuesday she was confident that lawmakers would consider "emergency and limited financial assistance" for the auto industry under the $700 billion bailout measure that passed Congress in October. She urged the outgoing Bush administration to support a compromise.

"In order to prevent the failure of one or more of the major American automobile manufacturers ... Congress and the Bush administration must take immediate action," Pelosi said.

The Bush administration has concluded that the bailout bill that passed earlier does not allow loans to the auto industry.

White House spokeswoman Dana Perino said Tuesday the companies had made business decisions "over the years that have led to this situation, but we have gone as far as we can with the authority Congress has given in order to help industries." But she said the White House was open to helping the auto industry.

Lawmakers are expected to take up the issue when they return to the Capitol for a postelection session beginning next week.

Democratic leaders will need to convince some skeptical lawmakers who question whether a bailout would cause changes in the auto industry or simply lead to more handout requests from other industries.

"Once we cross the divide from financial institutions to individual corporations, truly, where would you draw the line?" asked Sen. Jeff Sessions, R-Ala.

Michigan Gov. Jennifer Granholm said Wednesday that the crisis in the auto industry is urgent, arguing that "the national economy rests on this."

"This industry supports one in 10 jobs in the country," Granholm said Wednesday on CBS' "Early Show." "If this industry is allowed to fail, there would be a ripple effect throughout the nation."

She added: "This government decided that it was going to step in and throw $700 billion at the financial sector. We're just asking for a fraction of that."

Pelosi said any assistance to the industry should include limits on executive compensation, rigorous government review authority and other taxpayer protections.

Her request for legislation came less than a week after General Motors Corp. and Ford Motor Co. posted bleak third-quarter earnings reports. GM, the nation's largest automaker, posted a $2.5 billion quarterly loss Friday and warned that it may run out of money by the end of the year without government aid.

"We're in a situation where there's a great unknown about what will happen," said Sen. Debbie Stabenow, D-Mich. "And a great concern that at least one of the companies will find themselves in a situation where they cannot make it until January 20," when President-elect Obama is inaugurated.

GM spokesman Greg Martin said the automaker was "ready to work with Congress and the administration to secure the immediate support we need to bridge the current economic crisis."

Obama has urged the Bush administration to do more to help the industry and aides said he raised the issue with President Bush on Monday in an Oval Office meeting. Officials familiar with the conversation said the president replied he was open to the idea.

Congress approved legislation in late September to provide $25 billion in loans to domestic automakers and suppliers to upgrade factories to build more fuel-efficient vehicles. But the funding has stalled and supporters of the industry say it will not be sufficient to help the companies with their immediate financial problems.

Executives with GM, Ford and Chrysler LLC and the president of the United Auto Workers union pressed Pelosi and Senate Majority Leader Harry Reid, D-Nev., to provide an immediate $25 billion loan to keep the companies operating and a separate $25 billion to help cover future health care obligations for retirees and their dependents.

Pelosi's statement did not specify the size of the aid package. She has tasked Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, to draft legislation, and a companion effort is under way in the Senate.

Sen. Carl Levin, D-Mich., said lawmakers from his state are crafting legislation that would allow the auto industry to receive $25 billion in loans under the $700 billion bailout program. Levin said Reid told him that a rescue plan to automakers could be a separate bill or could be included in legislation to extend unemployment benefits to workers.

Pelosi's announcement raises the possibility that the postelection session could cover more areas. The Bush administration has said the enactment of a free trade agreement with Colombia is its top priority in Congress.

Many Democrats oppose the proposed agreement as written. But it's unclear if a compromise could be reached that would lead to financial help to the auto industry and a trade agreement clearing Congress.

(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)