The Bush White House on Friday morning [EST] signalled a turnaround and said it would now consider using some of the US$700bn bailout earmarked for the financial services sector after the Senate on Thursday night rejected a Democrat bill to advance US$14bn in emergency loans to Detroit’s Big Three automakers. Meanwhile, the US Treasury said it would prevent any automaker from collapsing.
While president Bush was on his way to his Texas ranch, White House spokeswoman Dana Perino issued a statement criticising the Congress failure to pass the rescue plan.
“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,” Perino said in the statement. “Given the current weakened state of the US economy, we will consider other options if necessary – including use of the TARP program – to prevent a collapse of troubled automakers.” She said that allowing the economic harm caused by such a collapse would be “irresponsible”, according to US media reports.
The outgoing administration had previously baulked at using the financial industry bailout funds directly for the automakers, maintaining that it was better to stabilise the banks so they could lend more money to automakers and would-be vehicle buyers, thus improving company liquidity and spurring sales.
But it appears that, with all other options exhausted, Bush, whose term ends on 20 January, does not want to leave office with the legacy that one or more US-based automakers was forced into bankruptcy – which General Motors has said would lead to liquidation – on his watch.
Incoming president-elect Barack Obama had yesterday urged Congress to act to avoid more job losses in an already troubled US economy.
The Treasury Department said Friday morning US time it was ready to prevent the collapse of nation’s three largest auto companies after the Congress rescue efforts failed.
Treasury spokeswoman Brookly McLaughlin told a news agency: “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.”