WASHINGTON (Reuters) - US auto executives appeared on Capitol Hill for a second day yesterday to argue their case for a $25 billion aid package as legislators in both houses and in both parties seemed to move closer to a deal.

The hearings, before the House Financial Services Committee, got off to a rousing start when panel chairman Barney Frank asked how the government could justify a bailout for banks and insurers, but not the automakers.

"Frankly, there seems to me to be an inherent cultural bias," Frank said. "Aid to blue-collar employees is being judged by a standard different than white-collar employees."

The weakened economy and global credit crisis pushed the US government into bailing out companies including insurer American International Group Inc, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.

The prospects of a automaker bailout have been uncertain. Congressional Democrats have proposed using money from the $700 billion bailout package for banks to aid the automakers, but the Bush administration has expressed opposition. In addition, some opponents of an automaker bailout have argued that reorganisation under bankruptcy would be the best solution to the carmakers' problems.

But legislators have started to talk about crafting some kind of deal.

Senate Republican leader Mitch McConnell said a compromise is the only way for legislation to become law now. He proposed to tap $25 billion of auto retooling loans already approved by Congress but not yet disbursed by the Energy Department — an approach supported by the White House.

Democratic Sen. Carl Levin of Michigan meanwhile urged the House committee not to let differing views about the source of US automaker loans hold up the aid.

"Are we going to permit a difference over the source of these loans to destroy an opportunity to help an industry so essential to this country?" Levin asked.

Senate Majority Leader Harry Reid, a Democrat, said he hopes the Senate can pass a bill this week.

However, "no one should be overly concerned if we are unable," Reid said.

General Motors and Ford shares fell in morning trade on the uncertainty of the bill's passage. GM was down 15.5 percent, to a 66-year low of $2.61, and Ford was down 24 percent at $1.28, a 26-year low.

Barclays Capital analyst Brian Johnson said that a viable bill likely would emerge only if elements of restructuring requirements in the proposal before the House were incorporated into the Senate draft and funding was diverted from the energy bill to gain White House support.

"Assuming defeat, GM would have to 'run on fumes' until the next Congress and administration, unless Congress were to reconvene in December to address emergency compromise legislation," Johnson said in a note to clients.

The auto executives repeated much of what they said yesterday when, for the first time, they confirmed how much they are asking from the government. General Motors is seeking between $10 billion and $12 billion, Ford is seeking roughly $8 billion and Chrysler would get $7 billion.