White House may tap $700B bailout fund for automakers

It would be "irresponsible" to hurt the economy by letting the Detroit Big Three automakers fall, a White House spokeswoman said Friday following the Senate's rejection of a massive auto industry bailout.

Speaking to reporters aboard Air Force One, press secretary Dana Perino said the White House is considering using money from the $700-billion US Wall Street rescue fund to support the domestic automakers.

Perino said the administration would not typically make such a move, but said the White House would consider the option due to the economic distress confronting the United States.

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

The U.S. Treasury Department also said it was ready to move to avoid the collapse of the industry.

"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," said department spokeswoman Brookly McLaughlin.

The $14-billion US bailout package collapsed in the Senate on Thursday night. It was rejected 52-35 on a procedural vote — well short of the 60 votes needed to pass the plan.

Republican senators had pressed for wage cuts, but the United Auto Workers had rejected that call.

Obama reacts to failed bailout bid

President-elect Barack Obama said he was disappointed that an agreement couldn't be reached, adding that supporting the economy should not be undermined by partisan political fights.

Obama said he remained hopeful that a short-term auto sector bailout could be reached, but he also pressed the need for a long-term restructuring of the industry.

Speaking in Detroit, UAW president Ron Gettelfinger said the only option is for Treasury Secretary Henry Paulson to use money from the $700 billion bailout fund "to prevent the imminent collapse of the automakers and the devastating consequences that would follow for millions of workers, retirees, for families across our nation, and for our economy as a whole."

Gettelfinger said it was important for the White House to use its influence to get money for the industry released as soon as possible.

"We cannot afford for there to be a run on the banks, if you will, at these companies," he said, meaning that suppliers and creditors might shorten up their terms and demand cash on delivery.