The Obama administration has acted strictly as an investor in overseeing the bankruptcy reorganizations of General Motors Corp. (GMGMQ) and Chrysler LLC and hasn't been directly involved in decisions on employee cuts and dealership closings, a senior Obama aide told Congress Wednesday.

"We have made an absolute determination that we're not going to get into micromanaging their decisions," Ron Bloom, a senior member of Obama's auto industry task force, told the Senate Banking Committee.

It was the first time an Obama official testified in Congress on the administration's auto industry rescue, and senators repeatedly questioned Bloom about the decision for the government to take ownership stakes in GM and Chrysler. The government is set to own 60% of the new GM and a smaller stake in the new Chrysler.

"The administration has embarked on a disturbing and I believe a difficult road," said Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee. "The most difficult question, of course, is how Treasury intends to get out of this."

Shelby added: "Could this be an economic Vietnam - in other words, easy to get in, hard to get out?"

Bloom said the administration was "reluctant" in converting taxpayer loans into equity stakes, but that it was intent on cutting the auto makers' debt.

"Piling on irresponsible amounts of new debt on top of the new GM would have simply repeated the mistakes of the past," Bloom said. "Likewise, giving away the equity stake to which taxpayers were rightly entitled would have been irresponsible."

Bloom said the administration had no timeline for selling the stakes but that it envisioned the revamped GM to hold an initial public offering of company stock in 2010, after the company spent time as a privately held company.

He said the task force studied other countries' auto industries as well as the evolution of Microsoft Corp. (MSFT) under Bill Gates to determine the best track for returning GM to a publicly traded company.

Bloom said the decision to sell the stakes would likely be dictated by the auto-sales market and the health of the broader economy, and that setting a timeline would create an "overhang" in stock that would cause a market disruption. "I do not anticipate there will be a detailed blueprint," he said.

Bloom defended the overall decision to bail out the auto makers, saying the government's efforts saved hundreds of thousands of jobs.

"The administration's decisions avoided a devastating liquidation and put a stop to the long practice in the auto industry of kicking hard problems down the road," he said.

Bloom also indicated the government will need to take more action to spur lending to potential car buyers and auto dealers.

"As with many lending markets in the current financial crisis, some government support of the U.S. automotive financing marketplace has been and will continue to be required to ensure that U.S. dealers and consumers have access to the necessary financing to buy cars," he said.

Bloom didn't specify what form that support would take.

The government has invested $7.5 billion in GMAC LLC, which finances GM and Chrysler vehicles.

Bloom said officials were looking at modifying a program run jointly by the Federal Reserve and Treasury Department designed to increase auto lending. That program, the Term Asset-Backed Securities Loan Facility, or TALF, has produced limited benefits for auto dealers because of eligibility requirements, he said.

It was the second congressional hearing in a week on the restructurings of GM and Chrysler, with a third scheduled for Friday, as lawmakers question key aspects of the rescue, such as the dealer closings.

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@dowjones.com