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Frank, Shelby spar over auto bailout issue

Nov. 19, 2008 at 10:03 AM   |   Comments

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WASHINGTON, Nov. 19 (UPI) -- A bailout of U.S. automakers would be a life support measure and would not force them to change their business model or management, a Senate Republican said.

However, a House Democrat countered Wednesday a proposed $25 billion in aid would be a loan that has strings attached and would have to be repaid.

While Congress would like to save the automakers, "I believe their best option would be some type of Chapter 11 bankruptcy, where they can renegotiate -- get rid of the management. These people have been the leaders of failure and they need to go," Sen. Richard Shelby, R-Ala., said on CBS' "Early Show."

Rep. Barney Frank, D-Mass., called bankruptcy "a favorite spectator sport for politicians and experts who don't have to engage in it. You have a whole network of suppliers, small businesses and others who would get stiffed, to use the legal term, in a bankruptcy."

Frank chairs the House Financial Services Committee and Shelby is the ranking Republican on the Senate Banking Committee.

U.S. automakers say they need federal assistance or face the possibility of bankruptcy. Democrats have proposed providing $25 billion from the $700 billion Wall Street bailout while Republicans and the White House favor releasing an already approved $25 billion loan package designed to help the automakers refit their plants to produce energy-efficient vehicles.

Frank said the federal government would be the first in line to be repaid if any automaker filed for bankruptcy.

Shelby said he didn't think financial assistance would stop at $25 billion.

"I believe it'll be $100 billion. It will just prolong the agony. These companies are failures now," he said.

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