- The Washington Times - Friday, September 26, 2008

UPDATED:

Defiant House Republicans stood their ground Friday as the White House and congressional negotiators struggled to get a $700 billion Wall Street bailout plan back on track.

President Bush made a fresh appeal for quick action a day after his high-stakes White House summit — which included presidential rivals Sens. John McCain and Barack Obama — appeared to set the bill back and sparked renewed partisan finger-pointing.

“My administration continues to work with the Congress on a rescue plan, and we need a rescue plan,” the president said to reporters just outside the Oval Office as a steady rain fell behind him.

“Any time you have a plan this big that is moving this quickly that requires legislative approval, it creates challenges,” Mr. Bush said. “Members want to be heard, they want to be able to express their opinions and they should be allowed to.”

The stock market appeared to take the Washington drama in stride, with the Dow Jones industrial index up 121 points and the broader S&P 500 index up as well.

But Treasury Secretary Henry M. Paulson Jr., the main architect of the bailout proposal, has warned that the real danger is in the credit markets, where the refusal of battered banks to make new business and consumer loans raises the threat of a general economic implosion.

Whether Mr. Bush’s appeal would sway members of his own party remained an open question, with House Republicans continuing to tout their own alternative plan that they say would avoid a direct taxpayer bailout of troubled banks and financial firms.

House Minority Leader John A. Boehner, whose caucus is fiercely opposed to the idea of a government-financed bailout, sounded a feisty note yesterday. He denied that House Republicans had torpedoed progress on the bill by springing their counterproposal at Thursday night’s White House summit.

“I don’t know what games were being played at the White House yesterday — a gang-up on Boehner — but if they thought they were rolling me they were kidding themselves,” Mr. Boehner told reporters.

House Republicans, who felt they had been excluded from intensive talks between Democrats and the administration, said their proposal had given them a seat at the table and highlighted their deep unhappiness with the Wall Street bailout.

Deputy Minority Leader Roy Blunt of Missouri, designated by Mr. Boehner as his chief negotiator in the talks, said he hoped a bill could be passed, but added that rank-and-file Republican concerns had to be taken into account if the package is to win broad support.

“Clearly, the Democrats have a majority in both houses of Congress. If they want to do this by themselves, they can do this in a minute. If they want to do this with us, we’re prepared to have that negotiation,” he said.

“Finally people realize enough that if they want this to pass it’s going to take some Republican support, and they’re looking at some of these conservative ideas,” Rep. Joe Barton, Texas Republican, who helped formulate the House Republican alternative.

While some Senate Republicans, notably Banking Committee ranking member Sen. Richard C. Shelby of Alabama, have come out against the administration’s plan, others have been working with Democrats to draft a bill.

“I think anybody who got up this morning and looked at the markets, especially the credit market, had to take a deep breath and say, ‘This is serious. We better do something,’” said Sen. Judd Gregg, New Hampshire Republican and the lead negotiator for the GOP in the Senate.

Top congressional Democrats, including Senate Majority Leader Harry Reid and House Financial Services Committee Chairman Barney Frank, accused the recalcitrant Republicans of undermining an emerging bipartisan consensus over the scope and mechanisms of the bailout plan they claim was taking shape early Thursday.

Mr. Frank said he did not see the Republican alternative proposal until Thursday afternoon, after a week of private negotiations and lengthy public hearings Tuesday and Wednesday involving Mr. Paulson and Federal Reserve Chairman Ben S. Bernanke.

“That is simply irresponsible,” he said.

Senate Majority Leader Harry Reid said he remained committed to passing the bailout bill and Mr. Frank told reporters that a firm outline of a bill could be completed by Sunday. Lawmakers are anxious to adjourn for the year with the election just five weeks away.

“We’re going to get this done and stay in session as long as it takes to get it done,” Mr. Reid said. But Democratic leaders are also pressing for a sizable Republican vote to pass the bill, fearing they will otherwise be left taking the blame from voters.

Lawmakers report a deluge of calls and e-mails from constituents opposing a bailout, but a new Associated Press-Knowledge Networks poll released Friday painted a more mixed picture.

The survey, conducted Sept. 25., found 30 percent of those polled supported the Bush bailout, 45 percent were opposed, and 25 percent were undecided.

The Wall Street aid package got a significant endorsement when former Federal Reserve Chairman Alan Greenspan and Reagan administration Treasury Secretary George Shultz called for quick passage of the rescue plan.

“Past experience with financial crises shows that overall economic activity contracts soon after the crisis, unless swift corrective action alleviates the crisis,” the two said in a letter posted on the Wall Street Journal’s Web site.

White House aides said Mr. Bush was calling Republicans in Congress Friday to lobby for a compromise, but declined to identify the targets of the lobbying push. Vice President Dick Cheney has canceled travel plans to stay in Washington and work with the House GOP, where he has a strong base of support.

Edward Gillespie, a top adviser to the president, told reporters in an impromptu talk that conservative Republican concerns about the package were “legitimate.”

“Their ideas are good ones,” he said, adding that the White House has already accepted some proposals while declining to identify which ones.

Mr. Gillespie, who worked on Capitol Hill for more than a decade, said lawmakers studying the rescue package want to “shape it and work it,” and the White House was willing to give them time to do that.

But he acknowledged that with some Republicans who oppose the idea of a taxpayer bailout on principle, there can be no debate.

“You can’t really argue against that,” Mr. Gillespie said. “When I say bipartisan support, that doesn’t mean it’s going to pass the House with 435 votes.”

The bailout would give the Treasury Department $700 billion to buy up bad mortgages and mortgage-based assets on the books of the nation’s banks and financial firms.

The emerging compromise between the Bush administration and senior Democratic lawmakers — which has not been nailed down — would include restrictions on pay for executives of companies that receive federal aid and a larger congressional say in when the money can be spent, provisions Mr. Paulson had originally resisted.

The list of principles also included help for homeowners facing foreclosure, judicial review of Treasury transactions under the plan and a chance for the government to take an ownership stake in companies being bailed out.

In one major administration concession, Mr. Paulson would receive the right to spend up to $350 billion over the funds up front, with Congress having the power to veto the additional funds.

The House Republican alternative would create a government-sponsored mortgage insurance program — in lieu of the government purchasing the bad loans outright and trying to sell them itself.

Instead of using tax dollars to buy up bad debt, the plan calls for the use of private capital through relaxing regulations, cutting taxes and charging higher insurance premiums to holders of mortgage-backed securities. Republicans hope this would result in private capital, rather than tax money, financing the rescue effort.

Rep. Eric Cantor, Virginia Republican and the party’s chief deputy whip, said he helped craft the proposal because most Americans overwhelmingly oppose using taxpayer money to bail out failing private companies.

“Let’s not turn to the taxpayers. Let’s have the investors on Wall Street, frankly, who own these assets pay for the premium, pay for the government guarantee, so we can get our markets going again,” Mr. Cantor said in an interview on CNN.

Sean Lengell and S.A. Miller contributed to this report.

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