WASHINGTON - CONGRESSIONAL Democrats are pushing legislation to send US$25 billion (S$37.74 billion) in emergency loans to the beleaguered US auto industry in exchange for a government ownership stake in the Big Three car companies.

Legislation being drafted by Representative Barney Frank, chairman of the House Financial Services Committee, would dip into the US$700 billion Wall Street rescue money, approved by Congress last month, for the auto aid.

President George W. Bush is cool to that idea. But the White House says he is open to helping the industry, which is buckling under poor sales, tight credit and a sputtering economy.

In an Oval Office meeting on Monday, President-elect Barack Obama spoke to Mr Bush about doing more to help the industry, aides said, and Mr Bush said he was open to it.

Any effort to throw the companies a lifeline could run into Republican roadblocks that could derail it in the Senate. In that chamber, Republicans, some of whom believe their votes for the Wall Street bailout hurt or even doomed their re-election bids, are loath to agree to any new money.

That party's Senate leader, Mr Mitch McConnell, was non-committal about additional aid. In a statement, his spokesman said Congress should move to speed the release of a US$25 billion loan programme passed earlier to help the carmakers develop fuel-efficient vehicles.

'It may be that there are changes that need to be made in order to expedite these low-interest loans. Other ideas have been floated, and all will receive a review as we approach the Senate's return next week,' said Mr Don Stewart, the spokesman.

Treasury Secretary Henry Paulson said on Wednesday the auto sector was critical, but the financial industry rescue was not designed for car companies.

'Any solution has got to be leading to long-term viability' for auto companies, Mr Paulson said.

He also suggested Congress could try to use the loan programme already in place to help the companies.

But Democrats say those loans were designed to help automakers adapt to new fuel standards, not to stave off the financial disaster the companies now say is imminent.

Democratic Senator Carl Levin, whose state, Michigan, is the centre of the US auto industry, is working with Mr Frank on the auto bailout.

White House press secretary Dana Perino said the administration is not responsible for the automakers' woes but understands the importance of the industry. Officials are reluctant to make any proposals for new aid, suggesting the companies hold much of the responsibility for their own survival.

The companies have made business decisions 'over the years that have led to this situation, but we have gone as far as we can with the authority Congress has given in order to help industries,' Ms Perino said.

Mr Frank's legislation would carve out a portion of the US$700 billion financial rescue programme for the Big Three automakers and let the government take an equity stake in them in exchange for the loans, said Mr Frank's spokesman, Steven Adamske.

The Treasury could take warrants to share in a portion of future profits and would have to be paid back before any other shareholder was. The car companies would face tougher restrictions on awarding pay packages to executives and dividends to their shareholders than the financial companies that get a piece of the original bailout.

Auto executives, labour leaders and other industry proponents are mounting an intense lobbying effort for a bailout, painting a grim scenario for the economy if even one of the Big Three companies were to go under.

They want an immediate US$25 billion loan to keep the companies operating and a separate US$25 billion to help cover future health care obligations for retirees and their dependants.

The Big Three and United Auto Workers union will have a high-profile chance to make their case at a hearing next Wednesday before Mr Frank's committee, where executives from Chrysler, Ford Motor and General Motors and a UAW leader are scheduled to testify.

It is critical that the nation understand this isn't just a Michigan problem, that one in 10 jobs in the country are impacted by the auto industry,' Michigan Governor Jennifer Granholm said in an interview.

A House vote on Mr Frank's measure could come as early as next Thursday. Democratic leaders also are considering pairing the measure with a broader economic aid bill including money for unemployed workers whose jobless benefits have run out, aides said. It was not clear whether such legislation could get enough support to pass.

On Tuesday, Ms Pelosi urged 'immediate action' for the industry, while Mr Reid said it would happen only with bipartisan support from Bush and Senate Republicans.

Ms Pelosi's request came less than a week after GM and Ford posted bleak third-quarter earnings reports. GM, the nation's largest automaker, posted a US$2.5 billion quarterly loss on Friday and warned that it may run out of money by the end of the year without government aid.

' We?re in a situation where there?s a great unknown about what will happen,' said Senator Debbie Stabenow, a Democrat who also represents Michigan. 'And a great concern that at least one of the companies will find themselves in a situation where they cannot make it until Jan 20,' when President-elect Obama, a Democrat, becomes president.

Democratic leaders will need to convince some skeptical lawmakers who question whether a bailout would cause changes in the auto industry or simply lead to more handout requests from other industries.

'Once we cross the divide from financial institutions to individual corporations, truly, where would you draw the line?' asked Republican Senator Jeff Sessions. -- AP