auto bailout negotiations fail in senate, page-16

http://money.cnn.com/2008/12/11/news/companies/whitehouse_warning/index.htm?postversion=2008121122

WASHINGTON (CNN) -- Two Republican congressional sources told CNN that Bush officials have been warning wavering Republican senators that if they don't support legislation to bailout big three automakers, the White House will likely be forced to use money passed for the Wall Street bailout.

This is a noteworthy change since the White House and Treasury Secretary Henry Paulson have previously refused to use bank bailout funds to help General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC.

The sources asked not to be named because of the sensitivities of private conversations.

The White House negotiated a deal with Democrats to give Detroit a short term $14 billion loan with strings attached, including a so-called "car czar" charged with helping the companies draw up restructuring plans.

Most Senate Republicans opposed the plan as too weak in terms of focusing long-term viability for the U.S. auto industry.

As part of their full-court press to urge skeptical Republicans to back it, they made clear that if Congress didn't act, the White House would have to step in to save Detroit from collapse with funds from the $700 billion Troubled Asset Relief Program (TARP), according to the sources familiar with the conversations.

One of the sources said the a White House official made clear to a GOP Senator that would be the worst option, because the loan could go to the auto companies with few or no requirements along with it.

Democrats had pressed the White House from the start to help Detroit by using some of the $700 billion for the financial sector, but the White House had refused.

Talks were underway late Thursday on another compromise auto bailout bill, so the White House threat may be moot.