Drive Time in D.C.

First Takeaway: The Bush administration is trying to find ways to provide a emergency financial package that could ease a merger between General Motors and Chrysler, the papers report today.

There are three options: 1) use some of the Tarp money available to Treasury Department (everyone is a bank now) 2) use $5 billion of the $25 billion in Energy Department loans intended to be used to help manufacture more fuel-efficient vehicles (a saved auto maker is a cleaner one); 3) have the government make an equity investment, which would require authorization from Congress (bring back Lee Iacocca!).

The Wall Street Journal says: "The combined entity would need about $10 billion in new equity to cover the cost of laying off workers, closing plants and integrating the two companies, say people involved in the talks."

The New York Times notes, "While few experts dispute the car industry's troubles, rescuing them would also increase political pressure to help ailing industries like airlines and steel producers."

Changes in the auto industry on a different front have been squeezing hedge funds, the Financial Times reports. The unexpected disclosure that Porsche, through derivatives had raised its stake in Volkswagen to 74.1 percent from 35 percent, sent hedge funds scrambling to cover short positions. The funds had bet that shares of VW, like other auto makers, would fall. But Porsche's move meant that there were few shares available to buy back.

"This was supposed to be a very low-risk trade and it's a nuclear bomb which has gone off in people's faces," said one hedge fund manager quoted by the FT in what could well be the hyperbolic statement of the day.

The New York Post, meanwhile, never one averse to kicking a rival media mogul when he's down, reports that Sumner Redstone's effort to renegotiate $800 million of National Amusement debt is complicated by the fact that half the lenders need to sign off on a deal. That's more than 50 institutions, the Post says.

G.M.'s chances sound better in comparison.

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