Obama Aide Defends US Auto Rescue Before Congress

A senior adviser to President Barack Obama waged a vigorous defense of the administration's auto-industry rescue Wednesday and said auto finance companies may need more government support.

Speaking before an increasingly skeptical Congress, Ron Bloom said it would have been "irresponsible" for the administration to forgive tens of billions of dollars of taxpayer loans to General Motors Corp. (GMGMQ) without taking an equity stake in the company. He said all stakeholders were treated fairly, and he defended plans by GM and Chrysler LLC to cut employees and close thousands of dealerships.

"The administration's decisions avoided a devastating liquidation and put a stop to the long practice in the auto industry of kicking hard problems down the road," Bloom said in prepared remarks before the Senate Banking Committee.

In the latest sign that the administration's rescue efforts aren't over, Bloom, a senior member of Obama's auto industry task force, indicated the government will need to take more action to spur lending to potential car buyers and auto dealers.

"As with many lending markets in the current financial crisis, some government support of the U.S. automotive financing marketplace has been and will continue to be required to ensure that U.S. dealers and consumers have access to the necessary financing to buy cars," Bloom said.

Bloom didn't specify in his testimony what form that support would take. The government has invested $7.5 billion to GMAC LLC, which finances GM and Chrysler vehicles.

Bloom said officials were looking at modifying a program run jointly by the Federal Reserve and Treasury Department designed to increase auto lending. That program, the Term Asset-Backed Securities Loan Facility, or TALF, has produced limited benefits for auto dealers because of eligibility requirements, he said.

"The Federal Reserve and Treasury continue to review and study the eligibility requirements across asset classes," Bloom said.

It was the second congressional hearing in a week on the restructurings of GM and Chrysler, with a third scheduled for Friday, as lawmakers question key aspects of the rescue such as the dealer closings.

Also scheduled to testify Wednesday was Edward Montgomery, the White House director of recovery for auto communities and workers.

The hearing was set to begin hours after Chrysler and Italian auto maker Fiat SpA (FIATY) closed on their government-brokered alliance.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; [e-mail]