WASHINGTON — In another about-face, the Bush administration says Congress needs to free up the second half of the $700 billion federal bailout. And now that automakers are getting a share, the floodgates are almost certain to open for other nonfinancial industries that want government help.
Wobbling insurance companies would probably be among the first to ask for help. Whether they get the money will probably be determined only after Barack Obama is sworn in as president.
State and local governments, also facing hard times in what is already the longest recession in decades, are expected to make some appeals. They’ll probably keep their primary focus on a probable economic-stimulus package next year.
The $17 billion loan to the automakers is another makeover for the bailout, which began as a plan to buy up bad mortgage debt instead of direct cash infusions, and with only banks as customers.
Treasury Secretary Henry Paulson said Friday that using the financial bailout package for loans to automakers means the administration has used up the first $350 billion of the fund.
Earlier, Paulson had said he expected to leave the remaining $350 billion to Obama’s team. But he said Friday that having Congress free up what is left of the money now was important “to support financial market stability.” The original plan was to buy up bad debt from banks, but Paulson abandoned that approach in favor of having the government directly buy stock in the banks. Paulson said the first way would have taken too long.
Paulson said he would consult with congressional leaders and Obama’s economic team to determine how to proceed. He and other Treasury officials did not offer a specific date for when the administration might formally request release of the second half of the bailout fund. Bush leaves office in one month.
The legislation that set up the rescue fund Oct. 3 requires the administration to submit a report to Congress when it determines it needs the second $350 billion, and to spell out how it will use the money.
