Bernanke: Auto Bailout Best Left to Congress

By JEANNINE AVERSA

WASHINGTON -- Federal Reserve Chairman Ben Bernanke suggested Tuesday that he would be reluctant to use the central bank's emergency lending program to help struggling U.S. auto companies.

In a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., Bernanke wrote that any decision about whether to provide financial aid to Detroit is best left to Congress.

Congress and the White House are pushing to clear the final obstacles to a $15 billion bailout of the auto industry, seeking agreement by the end of the day followed by swift passage.

The chief executives of Chrysler, General Motors (GM) and Ford (F) last week returned to Capitol Hill to again ask lawmakers for billions in emergency aid.

"The Federal Reserve would be extremely reluctant to extend credit where Congress has actively considered providing assistance, but after due consideration, has decided not to act," Bernanke wrote Dodd. The letter was dated Dec. 5 and released Tuesday.

A key consideration in letting an auto company draw emergency cash loans from the Fed is whether the company has sufficient collateral or other security to ensure repayment of the loan. "It is unclear whether the auto manufacturers have unencumbered assets of sufficient amount and quality to meet this requirement," Bernanke wrote.

And, even if they did, lending directly to an auto company would represent a "marked departure" in the use of the Fed's emergency program, which is aimed at promoting financial stability, a crucial underpinning for the broader U.S. economy, the Fed chief wrote.