Last month, Congress approved $25 billion in low-interest loans for automobile manufacturers and suppliers to retool their plants to build more fuel-efficient vehicles. However, slumping sales, frozen credit markets, and the current global economic crisis has prompted the Big Three automakers — General Motors, Ford, and Chrysler — to ask Congress for an additional $25 billion in aid. House and Senate Democrats, led by Rep. Barney Frank (D-MA) and Sen. Carl Levin (D-MI), are pushing legislation that would dole out the emergency funds from the $700 billion Congress previously allocated to stabilize the financial markets. Both House and Senate plans are accompanied with varying degrees of conditions, including strict oversight and limits on executive compensation. Levin even argued that, in order to receive the cash, the Big Three’s CEOs would have to resign. The White House agrees that the auto industry should receive the aid but claims that those funds should not come from the $700 billion allocated for struggling financial institutions. The White House argues that Congress should instead fast-track the $25 billion loan approved last month and drop the loan condition that Detroit build more fuel efficient cars. Despite agreement between the Bush administration and some in Congress that some form of auto bailout is necessary, many conservatives are staunchly opposed — arguing that free market capitalism should reign and the troubled auto giants should be allowed to fail. Given the opposition, prospects for passing auto industry bailout legislation remain dim. Failure to act would not only have a catastrophic effect on America’s auto industry but also on a U.S. economy already in tatters.

From The Progress Report