After the Senate refused to pass a rescue bill for the U.S. auto industry that was endorsed by President Bush and congressional Democrats, the Treasury Department said Friday it is ready to prevent the collapse of Detroit's Big Three carmakers.
"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," Treasury spokeswoman Brookly McLaughlin said.
Sources, meanwhile, told FOXBusiness.com that Treasury has decided to proceed and will seek concessions similar to Tennessee Sen. Bob Corker's plan.
But McLaughlin told FOXNews.com that no decision has been made yet and wouldn't speculate on when one would be reached. Sources close to the discussions told FOXNews.com that a decision could be made as early as next week.
The White House said Friday it would consider using money in the Wall Street bailout fund to help the automakers.
"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.
The Wall Street bailout fund is one of the few remaining options for General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks. Bush had originally refused to use the bailout fund to help the automakers, insisting that help come from Congress. But the White House said it must reconsider after the Senate failed to agree on a $14 billion rescue plan.
"Congress spoke last night. They don't have the votes to do anything," Perino told reporters on Air Force One as Bush traveled to a commencement speech in Texas. "They didn't get it over goal line and so we have to consider what other options we would take." She declined to say when a decision would be made.
About $15 billion from the first half of the $700 billion financial bailout remains uncommitted. Treasury in the past two months has pumped out about $335 billion to banks and insurance companies in an attempt to stabilize the financial system.
Treasury has the authority to loan the remaining $15 billion to the auto industry, even though it had resisted doing so before the Senate legislation failed Thursday. But to begin tapping the second half of the bailout, the administration would first have to notify Congress, which could block it or put new conditions on how the money is used.
President-elect Barack Obama is encouraging the White House and Congress to keep working on a rescue plan.
Obama said in a statement Friday that he's disappointed the Senate could not agree on a temporary assistance plan for the industry. He says reviving the economy should not be a partisan issue.
Obama says he's frustrated with industry mismanagement that helped create the current crisis, but he also says millions of American jobs rely on a viable auto industry. He said his hope is that a deal can be reached to provide temporary assistance while demanding long-term restructuring.
The Senate's rejection of the $14 billion rescue plan and further evidence of a deepening global recession made world stock markets plunge. U.S. stock index futures pointed to a big sell-off later on Wall Street. The Dow Jones industrial average was projected to drop 278 points, or 3.2 percent, to 8,292, while the broader Standard & Poor's 500 index was forecast to fall 33.80 points, or 3.9 percent, to 840.70.
In Detroit, United Auto Workers President Ron Gettelfinger said he was confident that a solution to the auto industry's financial crisis will emerge in Washington despite the Senate's defeat of a bailout bill.
Gettelfinger blamed the defeat of the auto industry bailout bill on southern Senators who he said are anti-union and anti-Detroit.
The Senate rejected the bailout 52-35 on a procedural vote Thursday night -- well short of the 60 required -- after the talks fell apart.
"I dread looking at Wall Street," said Senate Majority Leader Harry Reid in anticipation of Friday's stock market reaction. "It's not going to be a pleasant sight."
The Bush administration has repeatedly said the Wall Street bailout fund should not be used for emergency aid to the automakers because it was designed to restore stability to the financial sector. But with the Senate's action, Detroit's supporters looked to the White House for help.
"For God sakes, I hope the president acts," exclaimed Mayor Virg Bernero of Lansing, Mich.
Detroit's carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.
Many congressional Republicans and some economists said the companies would be best to pursue a prearranged bankruptcy that would allow them to restructure quickly. But most Democrats and the carmakers rejected that, arguing it would quickly lead to liquidation because consumers would never buy cars from a bankrupt auto company.
Perino, speaking on Bush's plane, said that, "Under normal economic conditions we would prefer that markets determine the ultimate state of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary, including use of the TARP (bailout) program to prevent a collapse of troubled automakers."
"A precipitous collapse of this industry would have a severe impact on our economy and it would be irresponsible to further weaken and destabilize our economy at this time," she said. "While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable."
Bush, before departing the White House, consulted with chief of staff Joshua Bolten and senior counselor Ed Gillespie, among others.
"Obviously, we've talked about the urgency of the situation," Perino said.