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House GOP won’t rush bailout plan

- The Washington Times - Saturday, September 27, 2008

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, holding out hope that some kind of deal could be struck this weekend.

Top congressional Democrats, including House Financial Services Committee Chairman Barney Frank of Massachusetts, said progress was being made and even predicted an agreement by Sunday, but House Republicans voiced less optimism and touted an alternative plan they say would avoid a direct taxpayer bailout of troubled banks and financial firms.

The deadlock did not faze the stock market as some had feared, with investors choosing instead to play a wait-and-see game. The Dow Jones Index rose 121 points and the broader Standard and Poor's 500 Index also finished higher, though trading was light.

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

House Minority Leader John A. Boehner, Ohio Republican, took a feisty stance in denying that House Republicans had torpedoed progress on the bill by offering their counterproposal at Thursday'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 think 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.

Senate Majority Leader Harry Reid and Mr. Frank continued to accuse the Republicans of undermining an emerging bipartisan consensus over the scope and mechanisms of the bailout plan they said 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.

Democratic leaders are pressing for a sizable Republican vote to pass the bill, fearing they will otherwise be left taking the blame from voters.

Minority Whip Roy Blunt of Missouri, designated by Mr. Boehner as his chief negotiator in the talks, said he hoped a bill could be passed and noted that the majority House Democrats don't actually need Republican votes. But he added that concerns of rank-and-file Republicans 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," he said. "If they want to do this with us, we're prepared to have that negotiation."

Earlier Friday, 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."

Mr. Bush also met Friday with British Prime Minister Gordon Brown at the White House and spoke with French President Nicolas Sarkozy, reassuring both leaders that the rescue plan would be effective and would soon be passed by Congress. Both men expressed support for the U.S. government's plan.

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 its quick passage.

"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 to the Wall Street Journal.

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

The bailout would authorize the Treasury Department to buy up to $700 billion of 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 more congressional say about when the money can be spent, provisions Mr. Paulson had originally resisted.

The list of principles also include 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, the Treasury secretary would receive the authority to spend up to $350 billion immediately, with Congress having the power to veto the additional $350 billion authorization later.

Lawmakers report a deluge of telephone 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 Thursday, found 30 percent of those polled supported the Treasury's bailout plan, with 45 percent opposed and 25 percent undecided.

While some Senate Republicans, notably Sen. Richard C. Shelby of Alabama, the banking committee ranking member, have come out against the administration's bailout idea, 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 party's lead negotiator in the Senate.

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.

Rep. Joe L. Barton, Texas Republican, said his colleagues in the House would be hard pressed to accept a deal that would allow the Treasury Department to buy failed loans - the central tenet of the administration's plan.

"We don't believe the federal government does well when it takes an equity ownership interest," Mr. Barton said. "I think that's very problematic."

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