WASHINGTON – Weary Democratic congressional leaders and White House officials agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry. But the rescue faced snags as Republicans raised deep concerns.
Congressional aides and a senior administration official said the proposed deal would speed the loans to Detroit's struggling car companies and place a "car czar" named by President George W. Bush in charge of overhauling the auto industry. Congress could vote on the plan as early as Wednesday and the money could be disbursed within days.
A breakthrough came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don't strike a deal with labor unions, creditors and others to ensure their survival by next spring — essentially pushing them into bankruptcy.
"A great deal of progress has been made on auto legislation that will protect the taxpayer and ensure that short-term financing is available only to companies prepared to undertake the dramatic restructuring necessary to become viable and competitive," Dana Perino, the White House press secretary, said late Tuesday.
Earlier in the day, Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, said the remaining issues were minor.
"There do not appear to me to be differences in principle of a sufficient nature to blow this thing up," said Frank, whose staff is helping to draft the bill.
Still, staff aides worked into the night fine-tuning legislative details of the agreement. It could face substantial obstacles from congressional Republicans, who remained skeptical of the White House-negotiated plan. A group of conservatives led by Sen. John Ensign, R-Nev., has threatened to block the measure.
A further stumbling block was Democrats' refusal to scrap language, vehemently opposed by the White House, that would force the carmakers to drop lawsuits challenging tough emissions limits in California and other states.
That measure "kills the deal," said Dan Meyer, Bush's top lobbyist.
Senior Democratic aides acknowledged as much Tuesday and said they expected the provision to ultimately be dropped.
Environmentalists, who count House Speaker Nancy Pelosi, D-Calif., among their closest allies, already were irate that the bailout uses money set aside for a program to help the automakers finance the retooling of their factories so they could produce greener vehicles.
Another remaining hang-up was over ensuring that Cerberus, the private equity firm that owns Chrysler LLC, would reimburse the government if the auto company defaulted on its loan, said a congressional negotiator who spoke only on condition of anonymity because he was not authorized to disclose details of the emerging deal.
But the White House and congressional Democrats resolved other major conflicts. Democrats said they were willing to toughen the measure to require that the czar revoke loans from car companies that couldn't show they were viable by the end of March — rather than simply allowing the overseer to take back the money.
That would essentially let the czar force an automaker into bankruptcy if it didn't present a feasible restructuring plan.
They were also near agreement to weaken a proposal to give the czar veto power over automakers' business transactions — something the White House and automakers had said was unworkable. They were discussing giving the overseer say-so over transactions of $100 million or more, instead of putting the limit at $25 million.
Even if they seal the deal, though, conservative Republicans who want to force one or more of the Big Three into bankruptcy warned they might try to block the measure, virtually guaranteeing that it will need a 60-vote majority to pass and possibly delaying approval for days.
"I think that not only myself, but several of us will be looking at possibly blocking this package," Ensign told CNBC.
The measure would be open to Detroit's Big Three, but is expected to provide emergency loans only to General Motors Corp. and Chrysler, which have said they could collapse within weeks absent federal help. Ford Motor Co. has said it doesn't need an immediate cash transfusion, but wants a $9 billion line of credit to insulate against further deterioration in the economy.
The rescue took shape with the nation in recession, Congress and the presidency both in transition, Wall Street ricocheting daily and the Federal Reserve and Bush Treasury Department fighting to steady the reeling financial industry.
Sen. Mitch McConnell, R-Ky., said he was concerned that Democrats were proposing a package that "fails to require the kind of serious reform that will ensure long-term viability for struggling automobile companies."
With their approach, "we open the door to unlimited federal subsidies in the future," McConnell said.
Getting 60 votes for an agreement, with many senators expected to be absent for the emergency, postelection debate, could be tricky.
Said Sen. Carl Levin, D-Mich., an ally of the auto industry: "This gets us to the 20 yard line, but getting over the goal line will take a major effort, particularly in the Senate." He called for Bush and President-elect Barack Obama to lobby personally for the auto bailout.
The legislation under discussion would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.
Also included in the plan is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.
Democrats also inserted a provision in the bill to bail out some of the nation's largest transit systems. The bus and rail systems could be on the hook for billions of dollars in payments because exotic deals they entered into with investors — which have since been declared unlawful — have gone sour with the collapse of American International Group Inc. and other financial institutions.