The members of Congress said in a letter obtained by The Associated Press that the disappearance of liquidity in credit markets "threatens to cripple these industries and the communities in which they operate."
"In this current economic environment it is imperative that the government ensures that liquidity is restored so that the U.S. auto industry is able to function until normalcy is restored to credit markets," said the lawmakers in a draft letter circulated among the Michigan delegation.
The letter, expected to be sent to the Bush administration on Thursday, asks Bernanke and Paulson to use their "broad regulatory authority" and the powers they received in the $700 billion bailout of the financial sector to restore liquidity in the U.S. auto industry.
New vehicle sales are expected to fall by 30 percent in October, the lawmakers wrote, which could drive car sales down to an annualized rate of 11 million vehicles, the lowest figure since 1983.
"Domestic automobile manufacturers face the most difficult conditions they have faced in decades," said Rep. John Dingell, D-Mich., in a statement. "We need to do something to help unfreeze the credit markets for that industry, as well as others."
Treasury spokeswoman Brookly McLaughlin declined comment because the department had not yet received the letter, which was first reported by the Wall Street Journal on its Web site.
Lawmakers from Michigan, home to General Motors (GM, Fortune 500), Ford (F, Fortune 500), Chrysler and several auto suppliers, last month helped arrange up to $25 billion in low-interest loans from the government to help the industry retool plants and build fuel-efficient vehicles. Sen. Carl Levin, D-Mich., has said he may seek another $25 billion in loans in a lame-duck session after the election.
Many banks and auto finance companies have tightened credit standards because they can't borrow money to lend, or they have been reluctant to lend and risk defaults. Some dealers have reported losing 20 percent of their sales as buyers get turned down for loans after agreeing to purchase vehicles.
GMAC Financial Services said earlier this month it would only make auto loans to customers with prime credit scores of 700 or above. General Motors Corp. sold 51 percent of GMAC to Cerberus Capital Management LP in 2006 but still owns the rest.
In July, Chrysler LLC's finance company stopped underwriting leases, citing uncertainty over resale values of cars and trucks returned to the company after leases end.
Automakers, including GM, have responded to the conditions with campaigns touting that credit is still available for many buyers. Ford Motor Co. said its credit arm is still making loans.
Toyota Motor Corp. (TM) also began offering zero percent financing for most of its models.
The letter outlines the broad reach of the U.S. auto industry, which the lawmakers said directly employs about 355,000 American workers and provides health care for nearly 2 million Americans.
"There is no single segment of America's economy that is more critical to the financial well-being of millions of Americans than the automotive industry," the lawmakers said.
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