(CNN) -- A rapidly deteriorating situation in the U.S. auto industry may serve as the backdrop for a classic contest of political wills between the outgoing Bush administration on one hand and both President-elect Obama and the newly strengthened Democratic congressional majority on the other.
Congress may reconvene next week to tackle the troubled auto industry's financial woes.
If President Bush refuses to help bail out the struggling Big Three automakers, the Democratic leadership is promising that it will do so, most likely in the form of a lame-duck session convened as early as next week.
House Speaker Nancy Pelosi, in a statement released Tuesday afternoon, called on key congressional leaders to work with the Bush administration "to craft legislation to provide emergency and limited financial assistance to the automobile industry under the Emergency Economic Stabilization Act."
According to spokesman Brendan Daly, Pelosi believes that the administration can assist the auto industry under its existing authority, but "in case [the administration doesn't], it needs to be done one way or another."
In her statement, Pelosi directed House Financial Services Committee Chairman Barney Frank to draft legislation extending the Treasury Department's authority to use bailout funds for the auto companies.
If the bill is needed, according to Daly, Congress can come back and vote as soon as next week, regardless of whether there is a deal on the larger economic stimulus package.
"We'll have to see what Speaker Pelosi is proposing. There are no details, so there's nothing to react to," White House spokesman Tony Fratto said in a statement Tuesday. "If Congress wants to change the law, we'll see how they intend to do it. Of course, it's strange that congressional Democrats would choose to ignore the $25 billion program they actually created to assist the automakers; that would be a better place to start."
Senate Majority Leader Harry Reid released a statement Tuesday night saying Democrats are "determined to pass legislation" to help the auto industry.
"Senate Democrats are committed to doing all we can to help the auto industry. ... They deserve no less," he said. "But until next year, we still have the slimmest of majorities in Senate; this will only get done if President Bush and Senate Republicans work with us in a bipartisan fashion, and I am confident they will do what is right for our economy."
The question of a possible bailout of the automotive sector -- and whether it might be tied to policy objectives more strongly favored by the Bush administration -- has been the subject of intense debate this week.
Both the White House and a senior aide to President-elect Barack Obama emphatically denied Tuesday that there had been any attempt on the part of President Bush, while meeting with Obama on Monday, to link a federal bailout of the auto industry or a second stimulus package to passage of a Colombia free trade deal.
Those two financial packages are favored by many Democrats, including Obama, and the free trade deal remains a top priority for the outgoing Republican administration.
"The president does support free trade but did not suggest a quid pro quo" with Obama, White House spokeswoman Dana Perino said Tuesday. "He did discuss the merits of free trade, but there was no linkage between Colombia free trade and a second stimulus package."
The denial of a proposed quid pro quo from Bush runs counter to reports in the New York Times and Washington Post suggesting otherwise. Those reports were based in large part on a leak from the Obama camp, which was adamant in denying any potential deal Tuesday.
There was no "wheeling or dealing" between Obama and Bush during their private Oval Office meeting Monday, the Obama aide said; the president and the president-elect each listed his top priorities but did not attempt to reach any agreements.
Obama is not "under any great illusion" that Bush will support a second economic stimulus plan, the aide said.
Obama did, however, strongly urge Bush to support billions of dollars in aid for the struggling auto industry during the increasingly likely lame-duck session of Congress, according to three officials briefed on the meeting.
The officials said Bush expressed skepticism about giving taxpayer money to automakers on the heels of a string of government bailouts for other industries. In addition, they said, the president urged Obama to help push through the free trade pact with Colombia, a key legacy item for the outgoing administration that is facing stiff resistance from Democrats on Capitol Hill.
But a senior Bush administration official downplayed suggestions that Bush was offering a tradeoff, saying the White House still believes that the trade deal "deserves to pass on its own merits" without being linked to anything else.
The officials familiar with the meeting said Obama, pushing the auto industry aid, made the case that dramatic action needs to be taken this year -- rather than after he is sworn into office -- because the Big Three U.S. automakers are bleeding cash at an alarming rate.
One of the officials noted that about one in 10 jobs in America is tied to the auto industry and that if one of the companies goes bankrupt, it could have a massive spillover effect in the credit industry and other sectors.
The senior Bush administration official said the White House is "open to ideas from Congress to accelerate funds they've already appropriated" to help the auto industry.
But the administration official said support for the auto industry would come only "as long as funding will continue to go to viable firms and with strong taxpayer protections."
"Congress created a loan program for the auto industry," Perino noted. "As we read it, we don't see anything in there that would give us the authority to help individual industries, but we are willing to listen to Congress as to how they might choose or not choose to provide additional authority so that we could accelerate those loans to viable companies. We understand that they're going through a very difficult time."
An official in the auto industry said that bringing the Colombian pact into the negotiations could be a poison pill that would prevent passage of an auto industry aid package.
But a senior Democratic aide suggested that even if Bush attempted to link the aid package to the trade deal, Congress may be likely to stand up to him and pass the aid package separately.
The senior aide said Democrats do not think "this president wants to add the demise of GM to his legacy list."
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