White House considers rescuing Big Three

The White House said Friday that it is considering using
funds from the $700 billion economic rescue package to bail out the auto
industry after the Senate failed to do so.

The White House had resisted using funds from the
Troubled Assets Relief Program (TARP) to help the Big Three, but following the
impasse in Congress on the issue, it may have to reverse course.

{mosads}“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 response to a failed
Senate vote.

“Under normal economic conditions we would prefer that
markets determine the ultimate fate of private firms,” Perino added. “However,
given the current weakened state of the U.S. economy, we will consider other
options if necessary – including use of the TARP program — to prevent a
collapse of troubled automakers. 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.”

Perino stressed that the benefactors of such a step,
namely the carmakers and autoworker unions, “must be prepared to make the
meaningful concessions necessary to become viable.”

The Treasury Department signaled on Friday morning that it is willing to support the automakers until Congress takes up additional legislation when it reconvenes.

“Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,” said Brookly McLaughlin, a Treasury spokesman.

The markets were down sharply when trading opened, with
the Dow Jones Industrial Average plunging more than 200 points, but recouped
some of the losses in its first hour.

Both Ford and
General Motors were down sharply in early trading. Ford had fallen nearly 10
percent while GM was off nearly 20 percent, even after the White House
announcement. Chrysler, the third American automaker, is not publicly traded.

Sen. Carl Levin (D-Mich.) said he is encouraged by the White
House statement, adding that “the effort to provide emergency bridge loans to
U.S. automakers is still very much alive.” 

“Use of TARP funds is the fastest, most feasible, most
immediate and most certain approach to provide the emergency bridge loans
needed by the auto companies,” Levin stated. “It was always the intent of the
TARP program to assist industries whose collapse would have a major impact on
the economy, including the financial sector. I am hopeful that the
President will act promptly to prevent this collapse and the resulting calamity
for our economy.”

GM, in a statement, also said it is encouraged by the signals
from the White House.

“We are prepared to work closely with the administration
on possible solutions that could prevent further damage to our nation’s economy
and also allow us to embark on an aggressive restructuring plan for long term
viability,” GM stated.

Silla Brush contributed to this article.

This article was updated at 11:52 a.m.