White House Willing to Help Auto Industry

Posted November 12, 2008 at 11:22am

Updated: 1:03 p.m.

Treasury Secretary Henry Paulson said Wednesday that he was open to new legislation to aid automakers, but he said any solution must ensure the long-term health of the industry.

Paulson called the automakers a “critical industry” and said the Bush administration is willing to consider legislation changing the terms of the $25 billion in loans already approved by Congress.

“Any solution has got to be a solution leading to long-term viability,” he said.

Paulson said that the larger $700 billion bailout package remains focused on the strains facing the financial system and getting lending going again. He has been under pressure from Democrats and some Republicans to use some of that money for an emergency aid package for U.S. automakers, whose stocks are plunging toward bankruptcy, threatening hundreds of thousands if not millions of jobs.

Paulson also said that the Treasury was effectively dropping its proposal to buy up troubled assets, which was the original rationale for the bailout, and instead using the cash to invest directly in companies. Paulson said he would not apologize for shifting strategies, and he noted that Congress had given him broad authority to use the money as he saw fit.

Paulson said that the investments in banks would be more powerful, and that he still believes the $700 billion would be sufficient to stabilize the financial system.

Paulson also was noncommittal about a broader stimulus package advocated by Democrats, arguing that nothing would be more stimulative than getting credit flowing again.

But while Paulson expressed a willingness to look at new legislation, White House Press Secretary Dana Perino today refused to say whether President Bush would act to rescue any of the car companies should they reach the point of failing.

“I’m just not able to say hypothetically what will happen,” Perino said, noting that Bush hopes things won’t progress to the point where action might be needed to prevent one of the companies from going down.

Perino reiterated the White House’s view that the language of the $700 billion bailout bill does not allow the administration to use funds for the automakers. “We’re not going to move forward with something that Congress hasn’t authorized us to do,” she said. Perino noted that the bailout law is written to prevent money from going to companies that are not viable.

“We think that the Congress was very wise in setting some limits,” she said.

And she reminded reporters that it is not Bush’s “natural inclination” to allow the government to intervene in the private sector. She suggested the decision to move forward with the financial system rescue package was made as advisers warned of “something worse than the Great Depression” if he didn’t.

But she did not rule out accepting changes to the law that would free up funds to automakers, and she suggested that Congress can act to help expedite loans already in the pipeline for the industry.

While not promising to accept any new economic stimulus proposals, Perino said one initiative the White House would consider is extending unemployment insurance, despite skepticism in the administration about the idea.