By JULIE HIRSCHFELD DAVIS
Associated Press Writer
WASHINGTON (AP) - Congressional leaders and the White House
agreed Sunday to a $700 billion rescue of the ailing financial
industry after lawmakers insisted on sharing spending controls with
the Bush administration. The biggest U.S. bailout in history won
the tentative support of both presidential candidates and goes to
the House for a vote Monday.
The plan, bollixed up for days by election-year politics, would
give the administration broad power to use billions upon billions
of taxpayer dollars to purchase devalued mortgage-related assets
held by cash-starved financial firms.
President Bush called the vote a difficult one for lawmakers but
said he is confident Congress will pass it. "Without this rescue
plan, the costs to the American economy could be disastrous," Bush
said in a written statement released by the White House. He was to
speak publicly about the plan early Monday morning, before U.S.
Flexing its political muscle, Congress insisted on a stronger
hand in controlling the money than the White House had wanted.
Lawmakers had to navigate between angry voters with little regard
for Wall Street and administration officials who warned that
inaction would cause the economy to seize up and spiral into
A deal in hand, Capitol Hill leaders scrambled to sell it to
colleagues in both parties and acknowledged they were not certain
it would pass. "Now we have to get the votes," said Sen. Harry
Reid, D-Nev., the majority leader.
Rep. John A. Boehner, R-Ohio, the House minority leader, said he
was urging "every member whose conscience will allow them to
support this" to back it, but officials in both parties expected
the vote to be a nail-biter.
The final legislation was released Sunday evening, and
Republicans and Democrats huddled for hours in private meetings to
learn its details and voice their concerns.
Many said they left undecided, and leaders were scrambling to
put the most positive face on a deeply unpopular plan.
"This isn't about a bailout of Wall Street, it's a buy-in, so
that we can turn our economy around," said House Speaker Nancy
The largest government intervention in financial markets since
the Great Depression casts Washington's long shadow over Wall
Street. The government would take over huge amounts of devalued
assets from beleaguered financial companies in hopes of unlocking
"I don't know of anyone here who wants the center of the
economic universe to be Washington," said a top negotiator, Sen.
Chris Dodd, chairman of the Senate Banking, Housing and Urban
Affairs Committee. But, he added, "The center of gravity is here
temporarily. ... God forbid it's here any longer than it takes to
get credit moving again."
The plan would let Congress block half the money and force the
president to jump through some hoops before using it all. The
government could get at $250 billion immediately, $100 billion more
if the president certified it was necessary, and the last $350
billion with a separate certification - and subject to a
congressional resolution of disapproval.
Still, the resolution could be vetoed by the president, meaning
it would take extra-large congressional majorities to stop it.
As Bush's team stepped up its efforts to corral reluctant
Republicans, the White House released a letter from his budget
chief, Jim Nussle, to Boehner saying the measure would cost
taxpayers "considerably less" than its eye-popping $700 billion
Lawmakers in both parties were poring over the 110-page bill.
Democratic leaders have made it clear they will not support the
rescue unless a substantial number of Republicans join them.
"It will take two to make this work," said Rep. Rahm Emanuel,
But it was a tough sell for lawmakers in both parties.
Rep. Joe Barton, R-Texas, an opponent, estimated that half of
the House's 199 Republicans are "truly undecided."
Lawmakers who struck a post-midnight deal on the plan with
Treasury Secretary Henry Paulson predicted final congressional
action might not come until Wednesday.
The proposal is designed to end a vicious downward spiral that
has battered all levels of the economy. Hundreds of billions of
dollars in investments based on mortgages have soured and cramped
banks' willingness to lend.
"If we do not do this, the trauma, the chaos and the disruption
to everyday Americans' lives will be overwhelming, and that's a
price we can't afford to risk paying," Sen. Judd Gregg, the chief
Senate Republican in the talks, told The Associated Press.
Rep. Barney Frank of Massachusetts, the House Financial Services
Committee chairman, predicted the measure would pass, though not by
a large majority.
"It's not a bill that any one of us would have written. It's a
much better bill than we got. It's not as good as it should be,"
A breakthrough came Saturday night, with the addition of a
requirement sought by centrist Democrats and Republicans to ensure
that the government be paid back by companies that got help. The
president would have to tell Congress after five years how he
planned to recoup the losses.
Another key bargain - this time to draw Republican support -
allows, but doesn't require, government to insure some bad home
loans rather than buy them. That's designed to limit the amount of
federal money used in the rescue.
"This is something that all of us will swallow hard and go
forward with," said Republican presidential nominee John McCain.
His Democratic rival Barack Obama sought credit for taxpayer
safeguards added to the initial proposal from the Bush
administration. Later, at a rally in Detroit, Obama said, "it
looks like we will pass that plan very soon."
The rescue would only be open to companies who deny their
executives "golden parachutes" and limit their pay packages.
Firms that got the most help through the program - $300 million or
more - would face steep taxes on any compensation for their top
people over $500,000.
The government would receive stock warrants in return for the
bailout relief, giving taxpayers a chance to share in recipients'
To help struggling homeowners, the plan would require the
government to try renegotiating the bad mortgages it acquires with
the aim of lowering borrowers' monthly payments so they can keep
But Democrats surrendered other cherished goals: letting judges
rewrite bankrupt homeowners' mortgages and steering any profits
gained toward an affordable housing fund.
It was Obama who first signaled Democrats were willing to give
up some of their favorite proposals. He told reporters Wednesday
that the bankruptcy measure was a priority, but that it "probably
something that we shouldn't try to do in this piece of
Frank negotiated much of the compromise in a marathon series of
up-and-down meetings and phone calls with Paulson, Dodd, D-Conn.,
and key Republicans including Gregg and Blunt.
Pelosi shepherded the discussions at key points, and cut a
central deal Saturday night - on companies paying back taxpayers
for any losses - that gave momentum to the final accord.
An extraordinary week of talks unfolded after Paulson and Ben
Bernanke, the Federal Reserve chairman, went to Congress 10 days
ago with ominous warnings about a full-blown economic meltdown if
lawmakers did not act quickly to infuse huge amounts of government
money into a financial sector buckling under the weight of toxic
The negotiations were shaped by the political pressures of an
intense campaign season in which voters' economic concerns figure
prominently. They brought McCain and Obama to Washington for a
White House meeting that yielded more discord and behind-the-scenes
theatrics than progress, but increased the pressure on both sides
to strike a bargain.
Lawmakers in both parties who are facing re-election are loath
to embrace a costly plan proposed by a deeply unpopular president
that would benefit perhaps the most publicly detested of all:
companies that got rich off bad bets that have caused economic pain
for ordinary people.
But many of them say the plan is vital to ensure their
constituents don't pay for Wall Street's mistakes, in the form of
unaffordable credit and major hits to investments they count on,
like their pensions.
Associated Press writer Laurie Kellman contributed to this
On the Net:
House Financial Services Committee:
House Speaker: http://speaker.house.gov
(Copyright 2008 by The Associated Press. All Rights Reserved.)