Friday, December 12, 2008

White House May Tap TARP for Automakers

ABOARD AIR FORCE ONE (Reuters) - The White House said on Friday it was considering tapping a $700 billion financial industry bailout fund to prevent a collapse of ailing U.S. automakers, a move that would mark a dramatic policy reversal.

"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," White House spokeswoman Dana Perino told reporters aboard Air Force One as President George W. Bush headed to Texas.

A willingness to consider use of TARP funds marked a major turnabout for the Bush administration after a proposed bailout of U.S. automakers failed in the Senate on Thursday night, raising the specter of an industry collapse.

The Republican White House until now had vehemently resisted the idea, pushed by congressional Democrats, of giving automakers access to the bailout package approved by Congress in October to rescue struggling financial institutions.

But Bush, serving out his final weeks in office before turning over the reins to President-elect Barack Obama on January 20, may have reconsidered in light of the further damage an auto industry failure would inflict on his already troubled legacy.

"Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms," Perino said.

But she said the White House was now open to other options for automakers because "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."

"While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable," Perino added.

The administration was forced to reconsider its position in light of the auto aid bill's failure in the Senate.

"Congress spoke last night. They don't have the votes to do anything. They didn't get it over the goal line, and so we have to consider what other options we would take, but I don't have a time frame on it," Perino said.

Source: Reuters

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