LETTER TO PRESIDENT BUSH

From Members of Congress

December 4, 2008
Pelosi, Reid, Dodd, Frank Renew Call on Bush to Use TARP to Aid Auto
Industry in Light of Risks to Financial System
Washington, D.C.— Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, Senate
Banking Committee Chairman Chris Dodd and House Financial Services Committee Chairman
Barney Frank today sent a letter to President George W. Bush to again urge him to use the authority
provided under the Troubled Assets Relief Program (TARP) of the Emergency Economic
Stabilization Act (EESA) of 2008 to provide limited, temporary assistance to the automobile industry
during this financial crisis. The letter notes that the failure of the Big 3 would have a major direct
and negative impact on the financial sector, not just on the economy as a whole. The Treasury
Department has stated that funding from the EESA should only be used to protect the U.S. financial
sector.

In the letter, they further state: “Your decision to utilize the TARP funds, or to work with the Federal
Reserve to make available assistance through its existing lending programs, or both, are essential to
the Congress’ ability to address this critical economic situation in a timely manner, and would also
eliminate the uncertainties inherent in the legislative process.”

Below is the text of the letter:

December 4, 2008

The Honorable George W. Bush

The President of the United States
The White House
1600 Pennsylvania Ave., NW
Washington, D.C. 20500

Dear Mr. President:

This week the U.S. domestic auto industry submitted their comprehensive plans for
restructuring their companies and moving promptly to produce more fuel-efficient, advanced
technology vehicles which are essential for their economic future and for the environmental needs of
our world. Hearings are underway in the House and Senate Committees into those plans, but it is
already clear that action should be taken by the federal government to facilitate the implementation
of these restructuring efforts and prevent the severe impacts to our economy that would result from
the bankruptcy of one or more of these companies.

We have previously urged that $25 billion of the funds provided in the Emergency Economic
Stabilization Act (EESA) can and should be used for emergency bridge loans for the domestic auto
industry. The response from the Treasury to date has been that these funds should only be used to
protect the U.S. financial sector. What is becoming clear, however, is that the failure of the Big 3
would indeed have a major direct and negative impact on the financial sector, not just on the
economy as a whole.
We again urge you to use funds available to you through the EESA to provide emergency bridge
loans to the auto industry. In testimony before the Senate Banking Committee today, Acting
Comptroller General Gene Dodaro indicated not only that the Treasury has the authority under EESA
to do so, but that the Federal Reserve also has the authority to provide assistance to the auto
companies. We agree with the Government Accountability Office’s (GAO) assessment and urge you
to consider this option in conjunction with funds from EESA. It is essential to take this action not
only in light of the new evidence about the impact of the failure of the auto industry on the financial
sector, but also in light of the industry’s plans which have been submitted to the Congress this week.
Those plans include the imposition of tough accountability through establishment of an Oversight
Board to oversee the disbursal and uses of the loans, a feature that also was included in the Reid and
Levin-Bond bills introduced in the Senate as well as the legislation proposed by Barney Frank in the
House last month. In its testimony before the Senate Banking Committee today, the GAO endorsed
this principle.

While an immediate loan must be a necessary of part of this effort, the Oversight Board should
review on an ongoing basis the adequacy of progress in implementing the auto industry’s plans and
make recommendations to the Treasury Department as it administers the loan. You have the power
to appoint such a board at the same time that you direct the Secretary of the Treasury to use the
EESA funds for these loans.

The Troubled Assets Relief Program (TARP) under EESA was created specifically to stabilize the
financial system from threats such as the imminent failure of large sectors of the automobile and
related industries. Recent research by a prominent financial firm concludes that the auto sector
represents one of the largest sectors in leverage finance for banks because of their large number of
high-yield bonds they have issued and that the companies’ failures would result in “credit crisis part
II.” The Ford Motor Company has concluded that the “Detroit 3, plus their suppliers create a $1.1
trillion gross exposure to the U.S. financial system,” and that “increasing the financial sector’s
negative exposure by up to $1 trillion and reducing the economic activity by up to $800 billion will
greatly exacerbate the current negative economic and financial climate.”

Congress may consider legislation to provide assistance to the domestic automobile industry next
week. Your decision to utilize the TARP funds, or to work with the Federal Reserve to make
available assistance through its existing lending programs, or both, are essential to the Congress’
ability to address this critical economic situation in a timely manner, and would also eliminate the
uncertainties inherent in the legislative process.

We are very hopeful that we can work cooperatively with the Administration and the Federal
Reserve to provide urgent assistance and support our domestic auto industry, just as other nations are
doing, during this extraordinarily difficult global economic collapse. We look forward to hearing
from you on an expedited basis, since we will be notifying colleagues tomorrow of next week’s
session.

Sincerely,

Rep. Nancy Pelosi Senator Harry Reid

Rep. Barney Frank Senator Christopher J. Dodd