WASHINGTON -- Citing danger to the national economy, President Bush approved an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans in exchange for tough concessions from the deeply troubled carmakers and their workers.
The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions.
Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.
Allowing the U.S. auto industry to collapse in the middle of what is already a severe recession is not a responsible course of action, Bush said.
"It would worsen a weak job market and exacerbate the financial crisis," Bush said. "It could send our suffering economy into a deeper and longer recession. And it would leave the next president to confront the demise of a major American industry in his first days of office."
President-elect Barack Obama, who takes office a month from Saturday, praised the White House move.
"Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers," he said. "With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together -- including labor, dealers, creditors and suppliers -- to make the hard choices necessary to achieve long-term viability."