White House, Congress Close to a Deal on Auto Industry Bailout

The White House and Congress are close to a deal on a bailout package for the automotive industry and may have one done by Tuesday.

Members of Congress have been proposing strict oversight over how the bailout money is spent by automakers but the White House has asked for additional conditions if it is to sign off on a deal.

According to the Washington Post, Congressional Democrats were favoring the establishment of a board, with members from various federal agencies, to oversee the bailout expenditures by car makers. But the White House has asked that President Bush appoint a single "car czar" to oversee the bailout and the Post is reporting that Democrats have agreed to the measure.

According to the terms of the deal, the bailout will come in the form of seven-year, low-interests loans. For the first five years, the loans will carry a 5 percent interest rate, and a 9 percent rate for the remaining two. The money will go out on December 15th. After 2 months, on February 15th, when an Obama appointee has replaced the czar, that new car czar will assess whether the automakers are complying with conditions and has the authority to pull back the loans if necessary.

The bailout will be far less than what the automakers were asking for and may not be enough to get them through 2009. The automakers had asked the US government for 34 billion dollars, up from a 25 billion dollar request just last month. This current package will be a 15 billion dollar emergency loan.

GM says it will need 4 billion dollars immediately just to make it to the end of the year and that it will need another 4 billion in January to keep afloat.

The automakers are hoping that more money will flow their way once the Obama administration takes office in January and provides more funding for the ailing industry. President-Elect Obama supported the initial 25 billion dollar bailout package for the auto industry. But they may have to make further concessions in order to get it.