Washington - The White House was considering on Friday
whether to divert funds from the 700-billion-dollar bail-out package
for Wall Street to the automotive industry after the Senate defeated
a similar package for US carmakers.
'It is disappointing that while appropriate and effective
legislation to assist and restructure troubled automakers received
majority support in both houses, Congress nevertheless failed to pass
final legislation,' White House spokeswoman Dana Perino said in a
statement.
A last-ditch effort to pass a 14-billion-dollar emergency loan to
resuscitate the ailing car industry fell apart late Thursday after
negotiations collapsed in the Senate, causing a wave of financial
gloom to ripple through world markets on Friday.
The White House could take some of the money from the financial
industry bail-out package - known as TARP - approved by Congress in
October to loan Detroit's automakers to prevent the potential loss of
millions of jobs, Perino said.
'Under normal economic conditions we would prefer that markets
determine the ultimate fate of private firms. However, given the
current weakened state of the US economy, we will consider other
options if necessary - including use of the TARP programme - to
prevent a collapse of troubled automakers,' Perino said. 'A
precipitous collapse of this industry would have a severe impact on
our economy, and it would be irresponsible to further weaken and
destabilize our economy at this time.'
The House of Representatives passed the automotive loan on
Wednesday, but the bill did not survive the Senate, where Republicans
refused to provide the 60 votes needed late Thursday in the 100-seat
chamber to end debate and move to a final vote. The final tally was
52 in favour and 35 against.
After hours of bargaining, Republicans and Democrats failed to
agree on a compromise deal. The focus of contention was the powerful
United Auto Workers (UAW) union's refusal to agree to Republican
demands for wage cuts and reduction in labour costs to the level of
Japanese competitors operating in the US.
The White House had pushed for the rescue plan from funds already
appropriated for carmakers to develop greener vehicles and had
stressed the financial industry bail-out was not to be used for other
industries. The legislation included strict oversight rules that
mandated the companies provide a viable business plan, and a clause
that would have required them to return the money if a government
appointed 'car czar' determined they were not meeting their
obligations.
General Motors Corp and Chrysler LLC have warned that they could
go bankrupt within weeks without government help, and Ford Motor Co
said it would most likely have to seek bankruptcy if one of the other
two go down. The automakers argued they needed the money to weather
the recession and a 25-year low in car sales in the last two months.
But many lawmakers blame the industry's struggles on a failure to
streamline production and cut costs over the past decade as foreign
competitors gained ground in the US market.
'None of us want to see them go down but very few of us had
anything to do with the dilemma that they've created for themselves,'
said Senator Mitch McConnell, the leader of minority Republicans.
President-elect Barack Obama has reluctantly supported the
automotive bail-out and expressed disappointment that it did not
clear the Senate.
'My hope is that the administration and the Congress will still
find a way to give the industry the temporary assistance it needs
while demanding the long-term restructuring that is absolutely
required,' Obama said in a statement Friday.
There are fears that a failure of the auto industry will not only
cost jobs in Detroit, but would also spill over to other parts of the
economy, including companies that make parts and work for the large
carmakers.
Republicans were insistent wages and total labour costs reach
parity by next year. While the UAW has agreed to reopen talks on
labour contracts, Democrats would not accept the tough timetable.
'It's over with. I dread looking at Wall Street. ... It's not
going to be a pleasant sight,' Senate Majority Leader Harry Reid, a
Democrat who strongly supported the bill, said, adding that there
would be 'no more work' on the bailout until the 'reconvening of the
new Congress next year.'
By midday Friday, the Dow Jones Industrial Average had fallen by
117 points, or 1.4 per cent.
Asian stocks tumbled in trading on Friday. Honda Motor Co and
Nissan Motor Co dropped more than 11 per cent over worries that the
failure of GM and Chrysler would impact suppliers who also serve the
Asian car industry. Denso Corp, the world's largest maker of car
parts, plunged 10 per cent. Markets in Europe also fell.
GM said it was 'deeply disappointed' that an agreement could not
be reached in the Senate and that it would 'assess all of our options
to continue our restructuring and to obtain the means to weather the
current economic crisis.'
The Big Three's top executives have spent hours in recent weeks
testifying before Congress to make their case for a rescue plan, but
some lawmakers were skeptical about providing billions of dollars in
taxpayers funds.
Reid said it was now up to President George W Bush to provide
assistance to the carmakers from the already approved 700-billion-
dollar bail-out fund for the financial sector.
Federal Reserve chief Ben Bernanke expressed his reluctance
earlier this week to use the central bank's emergency loan programme
for the carmakers. The Treasury Department is overseeing the
distribution of the finance sector bailout.
Bush's administration backed the deal passed by the House, but the
outgoing president had limited clout with his fellow-Republican
legislators.
USA
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