BAILOUT: Congress To Vote Monday & Wednesday

TimesPeople

September 29, 2008

Party Leaders Back Revised Plan for Bailout

By DAVID M. HERSZENHORN and CARL HULSE


WASHINGTON — Congress braced for a difficult vote on a $700 billion rescue of the financial markets after a weekend of tense negotiations produced a plan that Congressional leaders began selling to lawmakers on Sunday as significantly strengthened by new taxpayer safeguards.
The 106-page bill, intended to ease a growing credit crisis, came after a frenzied week of political twists and turns and still faced some resistance from lawmakers on both the left and right who portrayed it as a dangerous rush to economic judgment.

But leaders of both parties in the House and Senate were moving to back the legislation, which they said had been significantly improved from the Bush administration’s initial proposal by limiting gold-plated farewells for executives of some participating companies and a deal-clinching plan to eventually recoup any losses from the financial community.

That provision, pushed by House Democrats, was one of the last to be agreed to in a high-level series of talks that had top lawmakers and administration economic chiefs huddled in offices just off the Capitol Rotunda after midnight Saturday as they raced to strike an agreement before Asian markets open Sunday night.

Under the provision, if the Treasury Department program to purchase and later sell mortgage-backed securities records losses after five years, Congress is directed to develop a program to recover the losses from the participating financial communities.

Senator Judd Gregg of New Hampshire, the senior Republican on the Budget Committee and the lead Senate negotiator, said the economy faced an unthinkable catastrophe without the aid and he called on his colleagues to act positively and with alacrity.

“If we don’t pass it, we shouldn’t be a Congress,” Mr. Gregg said Sunday afternoon.

The two presidential candidates, who dipped into the negotiations at a contentious White House meeting Thursday, both gave guarded endorsements of the bailout plan Sunday.

Republicans won inclusion of some of their ideas, though a call to have the plan work more like an insurance program was not fully adopted. Republicans were also able to force from the bill provisions they described as favoring labor and liberal housing groups. And Democrats abandoned a proposal to have bankruptcy judges adjust mortgages for strapped homeowners.

House Republicans remained a potential stumbling block to the plan and the leadership was to hold a closed-door session Sunday evening to review the plan internally. But the party leadership was circulating information aimed at refuting some of the main criticisms of the plan, indicating they were poised to support it.

Members of the conservative rank-and-file remained unconvinced.

Congressional leaders and Treasury Secretary Henry M. Paulson Jr. had emerged from behind closed doors to announce the tentative agreement at 12:30 a.m. Sunday, after two days of marathon meetings.

“We have made great progress toward a deal, which will work and be effective in the marketplace,” Mr. Paulson said at a news conference in Statuary Hall in the Capitol.

In the final hours of negotiations on Saturday night, Democratic lawmakers, including Representative Rahm Emanuel of Illinois and Senator Kent Conrad of North Dakota, carried pages of the bill by hand, back and forth, from Speaker Nancy Pelosi’s office, where the Democrats were encamped, to the Treasury Secretary Henry M. Paulson and other Republicans in the offices of Representative John A. Boehner of Ohio, the House minority leader.

At the same time, a series of phone calls was taking place, including conversations between Ms. Pelosi and President Bush; between Mr. Paulson and the two presidential candidates, Senator John McCain and Senator Barack Obama; and between the candidates and top lawmakers.

“All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street,” Ms. Pelosi said at the news conference. “We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have done.”

In a statement, Tony Fratto, the deputy White House press secretary, said: “We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy.”

Mr. Obama and Mr. McCain both expressed support for the rescue package early on Sunday, while adding that it was hardly a moment for taxpayers to cheer.

“This is something that all of us will swallow hard and go forward with,” Mr. McCain said in an interview on ABC’s “This Week.” “The option of doing nothing is simply not an option.”
Mr. Obama, in a statement, said: “When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration. But this step is necessary.”

The backing of the presidential candidates will be crucial to Congressional leaders seeking to generate votes for the bailout plan among lawmakers, especially those up for re-election in November. The general public has bristled at the notion of risking $700 billion in taxpayer funds to address mistakes on Wall Street, and many constituents have urged their elected officials to vote against the plan.

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.
Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.
Saturday’s intense negotiating effort followed a tumultuous week, including a contentious meeting at the White House with President Bush and the two presidential candidates.

That meeting had moments of drama, including a blunt warning by President Bush. “If money isn’t loosened up, this sucker could go down,” he said. It ended with angry recriminations after House Republicans scotched a near-agreement from earlier in the day.

Mr. Paulson scrambled to revive the talks, and they resumed almost immediately. Congressional and Treasury staff then worked all of Friday and through the night, ending in the predawn.
Mr. Paulson and Congressional leaders stepped in at 3 p.m. Saturday and were in direct negotiations for most of the rest of the night. And immediately after the news conference, staff members began efforts to finalize the language.

Even then, their work is hardly over.

Congressional leaders who want the bailout to pass with solid bipartisan support had already begun to anxiously court votes, mindful of the difficulty they could face in a high-stakes election year.

Public opinion polls show the bailout plan to be deeply unpopular. Conservative Republicans have denounced the plan as an affront to free market capitalism, while some liberal Democrats criticize it as a giveaway to Wall Street.

Representative Roy Blunt of Missouri, the chief negotiator for House Republicans, who have been among the most reluctant to support the plan, expressed some satisfaction but did not commit his members’ support.

“We need to look and see where we are on paper tomorrow,” Mr. Blunt said. “We have been talking about how we can make these things work in a way that our conference can come together.”

Representative Barney Frank of Massachusetts, the lead negotiator for the House Democrats, said that there was no expectation of making anyone smile.

“This was never going to be a bill that was going to make people happy,” he said. “No solution to a problem can be more elegant than the problem itself. We are dealing with a very difficult problem.”

“Given the dimensions of the problem, I believe we have done a good job,” he added. “It includes genuine compromises.”

Aides described a tense meeting on Saturday afternoon that included Senator Max Baucus, Democrat of Montana, shouting at Mr. Paulson about executive pay caps.

Outside, stunned tourists visiting the Capitol watched as camera operators shoved one another to get footage of lawmakers talking outside of the meeting room.

At one point, when too much information was leaking out, staff members’ BlackBerrys were confiscated and collected in a trash bin.

While Congressional Republicans sent only their chief negotiators, Mr. Blunt and Senator Judd Gregg of New Hampshire, at least nine Democrats with competing priorities piled into the meeting, surprising the Republicans but apparently not unsettling them.

The centerpiece of the rescue effort remains the plan for the government to buy up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the economy.

The money will disbursed in parts, with an initial $250 billion to get the rescue effort under way, followed by another $100 billion upon a report by Mr. Bush to Congress.

The president could then request the balance of $350 billion at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the money.

Early in the day, the two presidential nominees were active from the sidelines. Mr. McCain telephoned Congressional Republicans to sound them out, and Mr. Obama got regular updates by phone from Mr. Paulson and top lawmakers.

Some lawmakers have made clear that they will not vote for the bailout plan under virtually any terms. “I didn’t want to be in the negotiations because I object to the basic principles of this,” said Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, who would normally be his party’s point man.

Pressed about his role, Mr. Shelby replied, “My position is ‘No.’ “

Officials, including Mr. Bush, stepped up efforts to sell the plan to the American public, which, according to opinion polls, is deeply skeptical.

“The rescue effort we’re negotiating is not aimed at Wall Street; it is aimed at your street,” Mr. Bush said in his weekly radio address. “There is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled assets.”

In a brief speech on the Senate floor, Senator Kent Conrad, Democrat of North Dakota, said: “It’s not just going to be Wall Street. The chairman of the Federal Reserve has told us if the credit lockup continues, three million to four million Americans will lose their jobs in the next six months.”

The ultimate cost of the rescue plan to taxpayers is virtually impossible to know. Because the government would be buying assets of value — potentially worth much more than the government will pay for them — there is even a chance the rescue effort would eventually return a profit.

Some Democrats had sought to direct 20 percent of any such profits to help create affordable housing, but Republicans opposed that and demanded that all profits be returned to the Treasury.


Jeff Zeleny and Robert Pear contributed reporting.