WASHINGTON — The Bush administration said on Friday that it was prepared to intervene to prevent the collapse of General Motors and Chrysler after Republican senators blocked a compromise proposal to rescue the automakers.
The decision came after a tense standoff this week in which senior White House officials pleaded with Senate Republicans not to block the measure, including a warning by Vice President Dick Cheney that they would be remembered for decades as the party of Herbert Hoover if the industry collapsed.
But while Senate Republicans stood their ground — in open revolt against President Bush — it was the White House that gave in.
Shortly before the American markets opened on Friday morning, White House and Treasury Department officials, concerned that steep declines in overseas stock markets could provoke a new round of market panic in the United States, said the administration would consider providing temporary relief.
After refusing for weeks to tap the $700 billion financial rescue fund, the administration suggested it would dip into the fund to at least permit the companies to continue their operations until the new Congress and new administration arrive next month.
“Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,” said Brookly McLaughlin, a Treasury spokeswoman.
Administration officials said they had not decided how much to loan the auto companies or on what terms, and were spending Friday examining their books and cash-flow projections.
The government officials said they expected the companies and the unions would be asked to make significant concessions. They also did not rule out the prospect of a bankruptcy for one or more of the companies, but vowed that it would not be “uncontrolled,” meaning that enough financing would be provided to enable a reorganization.
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