President Bush and Treasury Secretary Paulson have indicated they may tap the $700 billion Wall Street bailout fund as a result of the failed billed in Congress.
In light of the implosion of the automotive bailout bill in the United States, President George W. Bush issued a statement indicating the sector may get funds from the Wall Street bailout bill passed earlier. The Troubled Asset Relief Program (TARP) fund is valued at $700 billion, and was meant to prevent an economic collapse in the States stemming from Wall Street.
Bush said that he wants “to prevent a collapse of troubled automakers," which may include tapping the Wall Street bailout.
In its statement, the White House said the economy does not have the stamina to deal with a folded auto industry. The Big 3 alone employ nearly 800,000 people in the U.S., but countless other companies rely on the industry. Some of these, like parts suppliers, would not be able to sustain from injuries caused by a disastrous blow.
If the Senate can't push a bill through, the President will, "consider other options if necessary." One option would be to take money away from Wall Street and lend it under terms similar to those already proposed to GM and Chrysler LLC. Both companies claim to be near bankruptcy, although Chrysler is admitedly owned by a private equity firm that has plenty of liquid cash in reserve.
Chrysler is owned by Cerberus, who's CEO is former Bush Treasury Secretary John Snow. To add to that, they've hired Dan Quayle to act as a lobbyist for an auto bailout. Quayle was the Vice President under the elder President Bush. Also hired is former G.W. Bush legislative rep David Hobbs, and former Lousiana Democrat Senator John Breaux. Quayle, et al, did not come cheap: $7 million for his tab.
However, since Chrysler is now a Limited Liability Corporation its owners could be insulated from any damage resulting from the dissolving of Chrysler. This means that Cerberus is not obligated to infuse more of their own cash into Chrysler, prefering instead for the company to maintain solvency on its own.
Getting money from TARP would be a massive backpeddling by the president and current Treasury Secretary Henry Paulson. They have said that money should only be used for financial institutions, and no other industry.
Dana Perino, White House Press Secretary, was quoted as saying, “A precipitous collapse of this industry would have a severe impact on our economy and it would be irresponsible to further weaken and destablize our economy at this time.”
Secretary Paulson's PR representative said, "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."
However, giving non-competitive funding to a specific industry may violate World Trade Organization rules and other international trade agreements. The European Commission, the executive side to the European Union, said they will investigate any bailout for violations. "We will be very closely observing what is in their plan," European Commission spokesman Peter Power told the Dow Jones Newswires.
A bill to provide the auto industry with its own bailout derailed when the United Auto Workers union refused to agree with wage and benefit cuts to take place by the end of the year. The UAW cited their recent contract negotiations, and the fact that their contracts do not expire until 2011.
Because of this Senate Republicans lead a stop to the bill in a 52-35 vote.