Just in time for the holidays, here's the second installment in a fanciful look at how the current economic woes might affect North Pole Toys LLC.

WASHINGTON - The "Christmas Spirit" was nowhere to be found yesterday as elf union leaders and Santa Claus turned on each other during a heated congressional bailout hearing.

Earlier this week, Claus and other administrators from his company, North Pole Toys LLC, blamed part of their financial distress on the wages and benefits paid to members of the North Pole Elf Union Local 1225. Claus has asked for an $18 billion bailout.

The elves, however, returned fire during their first extended remarks in front of elected officials.

"We haven't seen one jolly red cent over the last three years from this bloated phony!" fumed Elvis, a union vice president who apparently doesn't have a last name.

"He's been paying us with carrots, candy and piping-hot cocoa. We put up with it because we care about the kids," Elvis fumed.

Elvin, another union official, said Claus' financial problems were the result of "years and years of wasted spending on vanity projects" like lighted holiday decorations bearing Claus' familiar face.

Winkle P. Snowflake, North Pole Toys' top financial executive, said the company launched an internal investigation two years ago that found many elves were keeping or selling toys and gifts that "fell off the back of Santa's sleigh."

" 'Epidemic' is the word I would use. The elves complain about their pay, but you should see some of their living quarters," Snowflake said. "They have Tickle-Me-Elmos and PlayStations stacked to the ceiling."

Sen. Arlen Specter, R-Pa., lambasted Claus, Snowflake and the assembled elves for their organizational mismanagement - and lack of holiday cheer.

Specter criticized Claus' cost-saving measures: laying off elves and selling Rudolph, his once-prized reindeer, as a cost-saving measure.

"Children love Rudolph. Children love the toys elves make," Specter said, as a single tear rolled down his face. "What's to keep them coming back to you now?"

Claus said he has switched to cheaper holiday clothing and forced his wife to bake crackers instead of cookies in an effort to save cash. The longtime holiday figure also said he would consider cutting down on the number of times he says "Ho-ho-ho."

'WE HAVE TO pay Paris Hilton $50 every time I say that," Claus explained, shaking his head in apparent disgust.

Without the bailout, Claus said, he'll only be able to deliver toys to 15 percent of the world's good children. He also outlined a so-called "Grinch Doomsday" scenario that would result in Christmas' demise after the 2011 holiday season.

"Look, people, I'm not sipping on too much eggnog here," Claus said. "We need your help. And some of you, frankly, owe me big time." At that moment, Sen. Ted Kennedy, D-Mass., stood up and walked out of the room. *

David Gambacorta is a Daily News reporter.

Look for Part III on Tuesday.