WASHINGTON — In the wake of yesterday's defeat of a measure that would have pumped $700 billion of federal money into a frozen credit market, some lawmakers fear the worst for U.S. auto finance.
"The greatest threat the auto industry faces right now is this credit crisis, because you buy cars on credit," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.
"The credit crisis is already having an impact on the automobile industry that is so important to my constituents in Michigan, and to hundreds of thousands of families around the country," said Rep. John Dingell, D-Dearborn, chairman of the House Energy and Commerce Committee. "If access to credit continues to dry up, the automobile financing companies will be unable to keep vehicles on dealership lots and help customers obtain financing."
The measure failed to pass the U.S. House of Representatives by a vote of 228 to 205. House Republicans, who had lobbied for more extensive taxpayer protections, ultimately voted against the bill by a 2-to-1 margin. Nearly a third of their Democratic counterparts agreed, sealing the fate of Treasury Secretary Henry Paulson's plan.
The vote followed a weekend that saw leaders from both sides of the aisle, including Republican presidential nominee Sen. John McCain and Speaker of the House Nancy Pelosi, D-Calif., working around the clock to drum up support for the proposal. Investors responded to the failed measure by sending the stock market on a 700-point plunge.
Chris Stinebert, president/CEO of the American Financial Services Association (AFSA), a trade group that represents the 'Big Three' automakers' captive lenders and several foreign banks, told the Detroit News that the future of U.S. auto finance hangs in the balance.
"Absent intervention from Congress," Stinebert said, "the ability of manufacturers to finance motor vehicle sales may come to a halt."