$25B loan for automakers likely

WASHINGTON (AP) — Among the few bills likely to actually become law before Congress closes shop for the elections is a plan to give struggling U.S. automakers $25 billion in federal loans.

Opponents criticize it as a taxpayer-funded industry bailout, but the legislation is steaming ahead anyway, buoyed by the support of both John McCain and Barack Obama.

It’s no coincidence that the legislation would help manufacturing states such as Michigan and Ohio, whose voters could very well determine the outcome of the presidential election.

The loans would be used to help General Motors Corp., Ford Motor Co., and Chrysler LLC retool their factories to produce cleaner, more fuel-efficient vehicles as required under an energy bill passed last year.

The automaker loan program was established — but not funded — under the same bill. That sets it apart from the federal government’s intervention to prevent the collapse of Bear Stearns and a subsequent takeover of mortgage giants Fannie Mae and Freddie Mac.

Funding is needed before any loans can be made. The money would subsidize the loans, provide a cushion for possible defaults and absorb the cost of permitting automakers to defer loan payments for up to five years. The Congressional Budget Office says the $25 billion in loans would cost the government $7.5 billion.

Consumer and environmental groups, along with conservative GOP lawmakers, have called the loan program a bailout and argued the industry should not be rewarded for failing to produce enough fuel-efficient vehicles instead of gas-guzzling trucks and sport utility vehicles.