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Congress Pushes To Seal Bailout Deal

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The New York Times

Published: September 27, 2008

WASHINGTON - The Bush administration and congressional negotiators agreed Friday to meet some demands of rebellious House Republicans as they sought to resurrect a $700 billion rescue plan for the nation's financial system that the critics said relied too much on government intervention.

Democrats said they had accepted a Republican proposal that would create a hybrid plan, allowing the Treasury to choose on a case-by-case basis between having the government buy mortgage-backed securities, or to create a government insurance program for those troubled debts, the option pressed by the rebellious Republicans because it would keep the securities in private hands.
Treasury Secretary Henry Paulson has dismissed the idea of an insurance program as inadequate, and has shown no indication that he would employ it, meaning that the concession appeared mostly symbolic.

Initial reaction among House Republicans suggested that an optional insurance program would not be enough to win their support. The resumption of talks provided new hope of a deal and it came as the atmosphere around the negotiations became more charged politically, as President Bush again appealed for urgent action, and the calendar pressured lawmakers who had hoped that Congress would adjourn this week so members could return home to campaign for re-election.

With the Jewish New Year beginning Monday evening, lawmakers must pass a bill through the House and Senate by then or face the prospect of returning to Washington late next week.

"We will not leave until legislation is passed that will be signed by the president," House Speaker Nancy Pelosi said.

Lead congressional negotiators said they would meet again today, but staff members, including officials from the Treasury Department, were working into the night, combing through the 102-page draft legislation that had some lawmakers predict at just before 1 p.m. Thursday that a deal was close at hand.

The renewed talks came even as lawmakers were still reeling from Thursday's high drama at the White House, where a meeting between Bush, congressional leaders and the two presidential candidates, Sens. John McCain and Barack Obama, broke down in acrimony.

Democrats sought to seize advantage after the failed meeting, which Bush convened after McCain suspended his campaign and suggested delaying the first presidential debate in Mississippi.

"Now that Sen. McCain is safely in Mississippi, we can get back to serious work," said Rep. Barney Frank of Massachusetts, chairman of the Financial Services Committee and the lead negotiator for House Democrats in the bailout talks.

House Republicans said McCain had saved their caucus from being stampeded in negotiations by Democrats and by the White House. "I believe and my colleagues believe that America is on the edge of an economic crisis," said Rep. John Boehner of Ohio, the Republican leader. "We believe that Congress needs to act and we need to act quickly."

Republicans on Friday sought to contain the disarray that led House members and McCain to balk at the administration's plan Thursday just hours after some Republican senators said they were close to a deal.

The purchase by the government of up to $700 billion in troubled assets is the centerpiece of the rescue plan, which seeks to restore liquidity to the markets and keep credit flowing to businesses and consumers.

The administration's original proposal asked for virtually unfettered authority for the Treasury secretary, but congressional leaders and Paulson had already agreed to a number of changes, including an independent oversight board; limits on pay for executives of firms that seek government assistance; and a mechanism that would allow taxpayers to profit should the rescue plan help companies prosper in the future.

The insurance program promoted by the House Republicans as an alternative to the government buy-up of troubled assets would require financial firms to pay premiums, and House Republicans appeared reluctant Friday to explain how it would work.

A major problem on Wall Street is that many of the firms are short on cash. Even Rep. Eric Cantor, R-Va., and a main proponent of the insurance idea, conceded that it could only work in conjunction with a direct purchase of troubled debt by the Treasury.

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