By Joseph J. Schatz, CQ Staff

When Democratic leaders asked the Bush administration this weekend to extend its financial industry bailout program to the auto industry, their request was tempered by calls for conditions on the aid — a sign of lingering unease among lawmakers and voters over the scope and terms of the ongoing federal intervention into the economy.

“...[W]ere you to determine that the automobile industry is eligible for assistance under [the program], we would urge you to impose strong conditions on such assistance in order to protect taxpayers and maximize the potential for the industry’s recovery,” House Speaker Nancy Pelosi , D-Calif., and Senate Majority Leader Harry Reid , D-Nev., wrote to Treasury Secretary Henry M. Paulson Jr.

“Other taxpayer protections should mirror those required of financial institutions currently participating in the Troubled Asset Relief Program (TARP), such as limits on executive compensation and equity stakes to provide taxpayers a return on their investment upon the industry’s recovery,” the letter from Reid and Pelosi said. “Any assistance to the automobile industry should reflect the principles contained in [the law] that guard against the need to recoup costs to the taxpayers.”

At least one Republican lawmaker echoed those comments. Appearing Sunday on NBC’s “Meet the Press,” Florida Republican Sen. Mel Martinez said the $700 billion program should be used to help automakers, albeit “with prudence and with caution.”

Since Treasury started using its authority under the new law (PL 110-343) last month — so far, mostly to take an equity stake in banks — lawmakers on both sides of the aisle have expressed concerns about its implementation. They have questioned whether Treasury is doing enough to curb excessive executive compensation at participating firms and worry it has imposed too few restrictions on how banks are using the federal money.

Reid and Pelosi wrote Paulson on Saturday, asking him to use the authority granted in the financial industry bailout law to aid the struggling automakers.

Under the bailout program, Reid and Pelosi said, “Congress granted you broad discretion to purchase, or make commitments to purchase, financial instruments you determine necessary to restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s workforce.”

Also appearing on “Meet the Press,” House Majority Whip James E. Clyburn, D-S.C., said that he is “in favor of Secretary Paulson taking a hard look at that package he has” in order to aid the auto industry. Clyburn said the bailout program should be used to “bring this industry back into the mainstream of our economy.”

The letter from Pelosi and Reid came two days after top executives from the “Big Three” automakers, as well as the United Auto Workers union, came to Capitol Hill to personally lobby Democratic leaders for more aid as the economy falters and their financial underpinnings crumble. By all accounts, that meeting included questions from lawmakers about how additional federal aid would be used, and ensuring it would result in jobs.

The letter also follows on the heels of an election in which states like Michigan, Ohio and Indiana — all of which have a strong auto industry presence — helped deliver Barack Obama the presidency and Democrats expanded majorities in both chambers of Congress.

“The economy and the credit crisis are significant challenges that are dramatically affecting consumer demand for automobiles,” a spokesperson for Ford Motor Co. said Sunday. “We appreciate Speaker Pelosi and Majority Leader Reid’s efforts to help the auto industry given these unprecedented economic challenges.”

The continuing resolution enacted in September (PL 110-329) included money to jumpstart a $25 billion direct loan program for automakers aimed at helping them shift to the production of more fuel-efficient cars. Automakers would like to see the size of that program doubled, perhaps if Congress advances a new stimulus package in a lame- duck session later this month.

President-elect Obama has expressed support for doubling the size of the loan program, and in his first press conference Friday made helping the automakers a priority.