The White House upped its commitment to bail out the American auto industry, moving late on Monday to send General Motors Corp. and its financing arm another $6 billion in federal money.
The new money brings the total of taxpayer-backed support to the carmakers to $23.4 billion.
The latest move comes after the Bush administration supported a $17.4 billion loan package less than two weeks ago to prop up GM and Chrysler LLC through March 2009 as part of an effort to encourage the industry to restructure. The administration acted after a bill supported by the White House and congressional Democrats was blocked by Senate Republicans wary of sending billions in taxpayer dollars to a struggling industry.
GM and Chrysler had both warned of their dire financial situations, with GM cautioning that it could not survive December without financial help. Ford Motor Corp., in the strongest financial situation of the Big Three automakers, will not receive federal money.
The Treasury Department will purchase a $5 billion equity stake in GMAC, the financing arm of GM, to spur lending to help consumers purchase cars. The money will come from the $700 billion financial rescue package that was intended originally for financial institutions. Treasury Secretary Henry Paulson had at first strongly opposed using the money for the auto industry.
An additional $1 billion will go to GM that will in turn use the money to buy stock in GMAC.
GMAC was approved for bank holding status last week, meaning it will be regulated by the Federal Reserve Bank. The move gives it a stronger claim to access for funds under the financial rescue package, the Troubled Asset Relief Program.
Paulson had intended to leave the last $350 billion of TARP funds to President-elect Obama’s administration, but the new $6 billion commitment raises questions about whether the administration will seek access to the money before Obama takes office. The administration must seek congressional approval for access to the rest of the money, but lawmakers on both sides of the aisle have heaped criticism on Paulson’s handling of the program, particularly as he shifted from the original intention of purchasing troubled assets to later using the money chiefly to buy equity stakes in banks.
Congress could choose to add new restrictions on how the rest of the TARP funds are spent.
Democratic lawmakers have discussed efforts requiring the Treasury Department to use some of the money to reduce foreclosures and support a program to modify existing mortgages.
The first $350 billion has been committed already to a range of banks, financial institutions and the automakers, but not all of the money has actually been spent. The money for GM and GMAC will come from this allocated yet unspent pool of money.