Congress and the White House inched toward a financial rescue of the Big Three auto makers, negotiating legislation that would give the U.S. government a substantial ownership stake in the industry and a central role in its restructuring.

Under terms of the draft legislation, which continued to evolve Monday evening, the government would receive warrants for stock equivalent to at least 20% of the loans any company receives. The company also would have to agree to limits on executive compensation and dividend payments, much like those contained in the government's $700 billion rescue of the financial industry.

In the case of General Motors Corp., such a move could give the government a large stake in the company and may hurt existing shareholders. GM is seeking about $10 billion in short-term loans and has a market capitalization of about $3 billion. The legislation didn't specify what kind of stock the government would take, leaving open the option it could be preferred, common, voting or nonvoting.

Assuming congressional Democrats and the White House come to agreement on the plan, the car industry would be the latest to submit to strict government scrutiny in return for a bailout, joining most prominently the banking sector.

The auto industry would undergo a restructuring process akin to bankruptcy reorganization, only with fewer rigors and with the government, not a judge, in control, and with many associated political complications.

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