Dec. 16 (Bloomberg) -- Treasury Secretary Henry Paulson said U.S. automakers will receive a federal aid package as soon as the government can draft a suitable plan that ensures the companies’ long-term survival.

“The autos will get the money as quickly as we can prudently do it,” Paulson said today in a CNBC interview. “Right now what I’m thinking about is autos.”

General Motors Corp. and Chrysler LLC are seeking $14 billion in government funds to stay afloat through the first quarter of next year. The Bush administration last week dropped its opposition to using funds from the $700 billion Troubled Asset Relief Program initially geared toward financial firms.

A bailout for automakers would expand Paulson’s reach into a new area of the economy: manufacturing. This year he has overseen government intervention into financial firms, as Treasury led takeovers of Fannie Mae, Freddie Mac and American International Group Inc. and bought stakes in dozens of banks.

When asked today whether the auto rescue would use money from the TARP, which was signed into law Oct. 3, Paulson responded that assembling the plan would take “a lot of work.”

“We’ve got to do it right,” he said. “It needs to protect the taxpayer and it needs to have a path to viability.”

House Financial Services Committee Chairman Barney Frank, a critic of Paulson’s management of the TARP, sent a letter to the Treasury chief today asking him to provide “critical bridge financing” to the automobile industry as long as the companies agree to some restrictions on the kinds of investments and transactions they make.

Industry ‘Mistakes’

“Given the serious mistakes that senior auto industry executives acknowledge they have made in the past, such safeguards are absolutely necessary to ensure that taxpayers are protected and that the retooling of this critical industry proceeds as quickly as possible,” Frank wrote.

President George W. Bush, in an interview that aired today on CNN, said he’s “considering all options” for a bailout of General Motors and Chrysler.

“I have abandoned free-market principles to save the free- market system,” Bush said. The U.S. economy is “in a huge recession,” he said.

The administration isn’t likely to reach a decision on aid until later this week, with tomorrow being the earliest, said a government official who spoke on condition of anonymity. In the meantime, the administration is weighing how to structure a deal.

Concessions

“Concessions are going to have to be made,” White House spokeswoman Dana Perino said today. “I don’t think that there’s any possible way” loans would be approved unless companies and labor unions agree to changes, she said.

Paulson so far has committed $335 billion of the first half of the rescue fund and today didn’t specify whether he’s made a decision about asking Congress for the other $350 billion.

“We’ve got a lot of firepower,” Paulson said, when asked about plans to seek the rest of the TARP, citing the Treasury rescue program as well as new Federal Reserve and Federal Deposit Insurance Corp. programs.

“We have shown that we know how to respond quickly to situations,” he said.

Paulson also applauded the Fed for its efforts to stabilize the U.S. financial system and economy, while declining to comment on specific aspects of today’s rate cut and announcement that it would buy assets as a monetary policy tool.

“We’re all very fortunate that we have a Federal Reserve that’s willing to do what’s necessary to get through some very challenging and historic times here,” Paulson said.

Regulators already have put measures in place to protect financial stability and prevent further collapses of companies that play a central role in market operations, he said. “I’m expecting no other major financial institution to fail,” Paulson said.

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; John Brinsley in Washington at jbrinsley@bloomberg.net

Last Updated: December 16, 2008 17:51 EST