White House pushes Alternative Auto Funding

December 12, 2008 12:06:17 PM PST
Republicans in the Senate Thursday night slammed the brakes on a massive loan for the U.S. auto industry. But the White House now said it has an alternative route to financial aid for the ailing carmakers. The Bush Administration has been forced to tap into the $700-billion dollar financial industry rescue package in order to prevent a threatened collapse of the auto industry. That's because the senate, in a late-night vote on Thursday, defeated legislation that would have extended up to $14 billion dollars in emergency loans to GM and Chrysler, companies that are preparing for bankruptcy.

In a statement, the White House said it was left with little choice because quote: "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."

Senate Republicans blamed the unions for not accepting steep wage cuts in 2009 to bring domestic worker pay on par with those who work for foreign car companies. "We are about 3 words, 3 words way from a deal," said Senator Bob Corker (R) Tennessee.

But the United Auto Workers said the fault lies with Senate Republicans more concerned with cutting union wages than saving the companies. "We could not accept the effort of the GOP to make workers and retirees shoulder the entire burden," said UAW President Ron Gettelfinger.

Access to the financial rescue industry funds is only a temporary solution.

"Even though the congress is done for this year, when the new congress comes in next year, when the new president comes in next year, they'll have to deal with this again," said George Stephanopoulos with ABC News.

Treasury Secretary Paulson has about $15-billion dollars from the initial financial industry rescue funds at his disposal. If he needs more, he has to get congressional approval.

After the Senate's decision came in, the global markets reacted. Just like a domino effect, shares from Germany to Japan and South Korea were down sharply.

The news triggered a slump in stocks causing Japan's market to close down more than 6-percent and the dollar hit a 13-year low against the yen.

The London market followed Asian shares into the red.

The global economic woes have forced European leaders to come up with their own stimulus plan that's worth $264-billion dollars. "Europe has agreed unanimously and in a united way to take coordinated action that is substantial, that is worth 1 percent of national incomes and that means that Europe and America will be working together to create jobs and growth," said British Prime Minister Gordon Brown.

World leaders said they will look into budget cuts and cutting taxes along with interest rates to get banks to lend money to consumers.



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