WASHINGTON - Congressional Democrats are pushing legislation to send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.
Legislation being drafted by Rep. Barney Frank, chairman of the House Financial Services Committee, would dip into the $700 billion Wall Street rescue money, approved by Congress last month, for the auto aid.
President George W. Bush is cool to the idea. But the White House says he is open to helping the industry, which is buckling under poor sales, tight credit and a sputtering economy.
Sen. Mitch McConnell, a Republican from Kentucky and the minority leader, was noncommittal about additional aid. In a statement, his spokesman said Congress should move to speed the release of a $25 billion loan program passed earlier to help the carmakers develop fuel-efficient vehicles.
Treasury Secretary Henry M. Paulson Jr. said yesterday that the auto sector was "critical," but that the financial industry rescue was not designed for car companies.
Sen. Carl Levin, a Michigan Democrat, is working with Massachusetts Democrat Frank on the auto bailout.
White House press secretary Dana Perino said the administration is not responsible for the automakers' woes but understands the importance of the industry. Officials are reluctant to make any proposals for new aid, suggesting the companies hold much of the responsibility for their own survival.
Frank's legislation would carve out a portion of the $700 billion financial rescue program for the Big Three, letting the government take an equity stake in them in exchange for the loans, said Frank's spokesman, Steven Adamske.
The Treasury could take warrants to share in a portion of future profits and would have to be paid back before any other shareholder. The car companies would face tougher restrictions on awarding pay packages to executives and dividends to their shareholders than the financial companies that get a piece of the original bailout.
Separately yesterday, Maryland Democratic Sen. Barbara A. Mikulski said she will introduce a bill next week where consumers will get a tax break if they buy a new passenger vehicle through the end of the year.
Mikulski said the temporary tax break she proposes is intended to "stimulate demand" at flagging car dealerships across Maryland and the rest of the nation. Under Mikulski's plan, consumers will be able to deduct the sales tax and the interest paid on a car loan if a vehicle is purchased through Dec. 31. The tax break would be available for cars priced under $49,500.
"It's simple, it's targeted, it's timely and it's temporary," Mikulski said. She said that Maryland has lost about 500 jobs so far this year connected to the closing of automobile dealerships.
By Mikulski's estimates, a family that bought a $25,000 minivan would save $1,553. The tax break would only be available to families earning less than $250,000 a year, or individuals making less than $125,000 a year. The tax breaks would be applied to all automobile manufacturers, including foreign companies, because of international trade regulations, she said.
Mikulski, who said her proposal is separate from continuing discussions in Washington, made the announcement at a Saturn dealership on York Road in Towson. She was flanked by representatives from the United Autoworkers Union and by J. Peter Kitzmiller, president of the Maryland Automobile Dealers Association, who said car dealerships in the state employ about 35,000.
"It's something that needs to happen and needs to happen now," Kitzmiller said of Mikulski's proposal. "We've got to start selling cars now."
The Associated Press and Baltimore Sun reporter Gus G. Sentementes contributed to this article.