- The Washington Times - Monday, September 22, 2008

Congressional Democrats on Sunday began to put their imprint on the Bush administration’s historic $700 billion bank rescue plan, persuading the Treasury Department to use the new powers it would acquire to keep people from losing their homes.

In the first of what are likely to be a series of concessions to Democrats, Treasury said it would use its leverage when acquiring defaulted loans to work with homeowners to avoid foreclosure, although it cautioned that not everyone can be saved.

Meanwhile, the massive restructuring of Wall Street continued Sunday night as the Federal Reserve announced that it has granted requests from Goldman Sachs and Morgan Stanley — the last remaining major investment houses on Wall Street — to become bank holding companies. The move enables the firms to acquire banks and take deposits that will bolster their resources and stability.

In weekend-long negotiations with the Treasury, Democrats demanded assistance for “Main Street” as well as Wall Street as a condition for getting the bailout bill quickly through Congress this week to ensure financial markets do not head back into a tailspin when they reopen Monday.


The demands from Democrats, which would add to the overall cost of the package but address criticisms that it is weighted too much in favor of banks, were voiced both in counterproposals in behind-the-scenes talks, as well as by the party’s standard-bearer on the campaign trail.

“As of now, the Bush administration has only offered a concept with a staggering price tag, not a plan,” Democratic presidential candidate Barack Obama said as he campaigned in Charlotte, N.C., the home of one of the nation’s biggest ailing banks, Wachovia Corp.

“Even if the U.S. Treasury recovers some or most of its investment over time, this initial outlay of up to $700 billion is sobering,” he said. “In return for their support, the American people must be assured that the deal reflects the basic principles of transparency, fairness and reform.”

Besides demanding that Treasury work with homeowners who have defaulted on their loans with an eye toward helping them reschedule or refinance the loans, Democrats said they want caps on the compensation of bank executives who sell their bad loans to the Treasury, as well as strict oversight of the Treasury program by Congress.

Treasury Secretary Henry M. Paulson Jr. said on “Fox News Sunday” that there is no need for legislative provisions to help homeowners, because Treasury will have the power to provide mortgage relief to homeowners once it acquires the loans from banks under the plan.

He noted that the administration already has programs to help mortgage holders stay in their homes. He said that owning the loans under the new program will give Treasury “leverage” with the companies servicing the loans to ensure that they do everything they can to avoid foreclosure. But he cautioned that many of the homeowners in default cannot be saved.

A source close to the negotiations told The Washington Times said Mr. Paulson is addressing Democratic concerns, although Treasury is reluctant to put the mortgage relief provisions into legislative language.

As a possible model for Treasury, the Federal Deposit Insurance Corp. has instituted a program of helping homeowners who took out loans from IndyMac bank, which the agency shut down in July after it succumbed to bad debts. Democrats also hit on the need for accountability from Treasury and bank executives, and their concerns were seconded by Republican presidential candidate John McCain.

House Speaker Nancy Pelosi, who led negotiations with the Treasury over the weekend, said Sunday that Treasury’s plan “does not include the necessary safeguards.” The California Democrat also called for “independent oversight, protections for homeowners and constraints on excessive executive compensation.”

Mr. Obama agreed Sunday, saying, “There must be no blank check when American taxpayers are on the hook for this much money.

“Taxpayers shouldn’t be spending a dime to reward CEOs on Wall Street while they’re going out the door,” he said.

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