OTHER DEVELOPMENTS

CITIES: Franklin, other mayors ask Paulson for help

Top officials from three large cities, including Atlanta Mayor Shirley Franklin, asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.

Philadelphia Mayor Michael Nutter, Phoenix Mayor Phil Gordon and Franklin made their request in a letter to Treasury Secretary Henry Paulson, seeking help with the pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.

On Monday, Franklin wrote a three-page letter to U.S. Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, pushing for what she described as a “federal rescue” plan for cities. Franklin said the city is facing a projected budget shortfall of at least $50 million, which she attributes to the national economic crisis. Nutter said he delivered the Paulson letter in person to Phillip Swagel, Treasury’s assistant secretary for economic policy, in Washington.

Asked about the request Friday, a Treasury spokeswoman referred to Paulson’s statement Wednesday that assistance to local and state governments wasn’t the purpose of the bailout funding.

TRANSIT: D.C. deal offers some hope for MARTA

The Washington, D.C., transit system reached an agreement Friday with a Belgian bank seeking $43 million from a financing deal gone bad after the near-collapse of insurer American International Group.

The settlement may help other transit agencies, including Atlanta’s MARTA, that are facing billions of dollars in similar costs.

The Washington Metro system and KBC Group made the deal after three days of talks overseen by a federal judge. Terms were not disclosed on the judge’s instructions, but both sides said they were pleased with the outcome.

John Catoe, general manager of Metro, said it will give other transit agencies leverage as they try to unravel their own complex leasing arrangements with banks that are now at risk because of AIG’s financial problems.

U.S. District Judge Rosemary M. Collyer sent a strong message when she warned against banks trying to collect “windfalls” from public transportation systems, Catoe said.

KBC lawyer Craig Kline called the agreement “a win for everybody.”

Officials from Metro and several other transit agencies plan to lobby Congress next week for help in shoring up the leasing arrangements, deals that provided tax shelters for the banks and a lucrative source of income for the agencies. They hope to convince lawmakers and the Treasury Department to allow the federal government to back the financing deals.

AUTOS: Bailout proposal still stalled

The White House urged congressional Democrats on Friday to speed up access to $25 billion in federal loan guarantees for the ailing automakers and accused the Democrats of “choosing a path that will only lead to partisan gridlock” by also insisting on tapping into the financial industry bailout fund to help the carmakers.

Congress and President Bush approved money for the loan guarantees this fall as part of a major spending bill, but those loans were restricted for the development of more advanced, fuel-efficient vehicles. A 2007 energy bill, which set the rules, also limited the loans to “financially viable” companies, raising doubts about whether General Motors could qualify. A consensus among industry analysts is that GM alone needs about $15 billion in unrestricted aid, which would keep it afloat for a year at most.

Democrats in recent days have called repeatedly on the Bush administration to provide $25 billion in financial assistance to the automakers using money from the $700 billion financial bailout. The administration has said that money should go only to financial institutions to improve the flow of credit and has suggested easing access to the loan guarantees instead by relaxing the fuel-efficiency requirements.

The majority leader, Sen. Harry Reid of Nevada, rejected the White House proposal as “unacceptable.” A showdown is expected next week during a special session of the Senate.

—- From news services and staff writers Eric Stirgus and Paul Donsky