WASHINGTON - DEMOCRATS in Congress on Monday launched a new multi-billion dollar drive to save the US auto industry, but the White House warned against their plans to take funds from a huge finance industry bailout.

Less than two weeks after Mr Barack Obama's presidential election victory, Democrats and Republicans on Capitol Hill clashed in a new showdown over the reeling US economy, at the start of a 'lame duck' session of Congress.

Democrats unveiled a US$25 billion (S$38.1 billion) plan to shore up the reeling car industry using funds drawn from the finance bailout, in the final congressional session of President George W. Bush's turbulent presidency.

'All it would take is one stroke of a pen and that problem would be solved,' Mr Reid said, as he opened the Senate lame duck session.

'We are seeing a potential meltdown in the auto industry, with consequences that could directly impact millions of American workers and cause further devastation to our economy.'

But the White House got in a preemptive strike before lawmakers reported for work saying the special rescue funds for banks were not the answer, calling on Congress to adapt an existing US$25 billion auto industry loan programme.

'The administration does not want US automakers to fail, and in fact we support assistance to automakers,' Mr Bush's press secretary Dana Perino said.

But 'we believe this assistance should come from the programme created by Congress that was specifically designed to assist the automakers - from the US$25 billion Department of Energy loan programme,' she added.

'This is the appropriate funding to use for automakers rather than seeking an additional US$25 billion from the Tarp programme' - the Troubled Asset Relief Programme, as the bailout is known.

'The Tarp programme was never intended by Congress to assist automakers or other sectors of the economy - it was solely intended to deal with what is an ongoing credit crisis in our financial sector.'

Despite the political posturing, it seemed unlikely the Democratic leadership would muster sufficient votes to press the bailout through the Senate.

Until Sunday, Democrats had a 51-49 vote majority in the chamber, but president-elect Obama resigned his seat on Sunday, further paring their numbers.

Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate and overcome the minority's obstruction tactics with a 60-seat filibuster proof majority.

Ms Perino pointed out that any attempt to reopen the Tarp programme would not make it through the Senate, and said the White House was working with Senate Republican minority leader Mitch McConnell on the issue.

But Mr John Engler, CEO of the National Association of Manufacturers trade association backed plans to tap the finance industry bailout.

'The auto industry is in dire need of relief today, and such relief should be seen as a critical component in our overall effort to restore confidence to consumers and investors, and stabilise the economy,' he said.

In the new Senate, which takes office in January, Democrats will have at least 57 seats and their numbers could rise further with three races from this month's congressional election still undecided.

Democrats also put a new economic stimulus plan on the table on Monday, which includes infrastructure spending, rises in unemployment insurance and food aid for the poor - but prospects for the bill are also considered slim.

The House of Representatives is set to return for its lame duck session on Wednesday and House speaker Nancy Pelosi was meeting Mr Paulson and Federal Reserve chief Ben Bernanke on Monday.

The Senate Banking Committee meanwhile confirmed the chairmen and chief executives of the 'Big Three' automakers, Ford, Chrysler and General Motors, would come cap-in-hand to Capitol Hill on Tuesday for a hearing.

The three top executives are due to address a House panel on Wednesday.

Many lawmakers have questioned whether bailing out the automaking sector would simply put off a day of reckoning for an industry which has failed to compete with foreign auto giants.

But others warn letting the industry fail could have a devastating impact on the already crisis-ridden US economy, and cost tens of thousands of jobs.