- The Washington Times - Saturday, September 20, 2008

Congressional leaders expressed concern Saturday about the Bush administration’s request to spend as much as $700 billion buying up bad debt, promising to work quickly to pass legislation but vowing to add measures that protect lower-income Americans from economic risk.

“It’s clear that the administration has requested that Congress authorize, in very short order, sweeping and unprecedented powers for the Treasury secretary to confront a financial crisis of historic proportions,” said House Speaker Nancy Pelosi, California Democrat, in a statement e-mailed to reporters late in the day.

Mrs. Pelosi promised that Democrats would “strengthen the proposal by ensuring that the government is accountable to the taxpayers in any future actions under this broad grant of authority, implementing strong oversight mechanisms and establishing fast-track authority for the Congress to act on responsible regulatory reform.”

Related stories: Paulson resists calls for added help in bailout and Bailout plan costliest rescue in U.S. history

House Majority Leader Steny H. Hoyer, Maryland Democrat, cited the “need to act prudently” and said House Democrats would “make changes necessary to provide accountability, help working Americans and protect the taxpayer’s interest.” Sen. Charles E. Schumer, New York Democrat and chairman of Congress’ Joint Economic Committee, agreed, saying that while the Bush administration’s bailout plan was a “good foundation of a plan that can stabilize markets quickly, it includes no visible protection for taxpayers or homeowners.”

“We look forward to talking to Treasury to see what, if anything, they have in mind in these two areas,” he said.

Even Republicans aligned with the president spent the day poring over the implications of granting the Treasury secretary extraordinary powers to snatch up devalued mortgage-backed securities to prevent them from dragging down the entire economy.

“We must closely scrutinize the proposal to make sure it works, and we must do so quickly,” said Senate Minority Leader Mitch McConnell, Kentucky Republican, although he cautioned the Democrats against adding additional provisions to the plan, particularly if done for partisan advantage or with an eye on the November elections.

“Simply put, now is not the time for partisan plans or pet projects,” Mr. McConnell said.

The president, meanwhile, defended the plan in a rare weekend press conference and said he was confident Capitol Hill would move quickly to approve it.

Though the administration had hoped for an agreement on some details by Sunday, in order to reassure global markets, the mood on Capitol Hill was doubtful that consensus would be reached that quickly.

Yet the president said that in his conversations Friday with congressional leaders, he “found a common understanding of how severe the problem is and how it is necessary to get something done quickly, and I think we will.”

The Treasury Department formally submitted its simply worded but sweeping plan to Congress on Saturday morning and then briefed staffers from key congressional committees around midday.

The 850-word proposal would allow the Treasury secretary to buy up as much as $700 billion of “mortgage-related assets from any financial institution having its headquarters in the United States.”

The plan would raise the U.S. debt ceiling from $10.6 trillion to $11.3 trillion and would require the secretary only to make semiannual reports to Congress over the next two years, after which most of the powers under the special law would expire.

Meetings will continue Sunday as the government, central bank and legislators seek agreement on key details of the plan.

Measures that Democrats might consider adding to the plan include measures to help homeowners avoid foreclosure, to require lenders to write down mortgages on homes that have devalued over the last two years, and to prevent executives of failed financial companies from receiving “golden parachutes,” or large compensation packages.

Sen. Barack Obama, the Democratic presidential nominee, has voiced opposition to “golden parachutes” and continued to do so Saturday while campaigning in Daytona Beach, Fla.

But the Illinois senator made no specific comments about the administration’s plan and instead attacked his Republican opponent, John McCain, charging that the Arizona senator was “a little panicked” about the nation’s fiscal status.

Mr. Obama said that Mr. McCain’s deregulatory approach to health care would fail just like he said it has failed the stock market and said that Mr. McCain’s support for private Social Security accounts meant he would “gamble” away Americans’ life savings.

Mr. McCain in Wisconsin charged back that Mr. Obama was being advised by some of the same business executives that he said contributed to the housing mess that started the current downturn.

The Arizona senator said that he anticipated reviewing the proposal and any changes made during negotiations with Congress and that the plan he announced Friday advocated “an approach that would proactively resolve troubled financial institutions, enforce discipline on management and shareholders, and minimize the burden on the taxpayer.”

Nonetheless, some conservative Republicans are outraged that the Bush administration is forsaking core principles of capitalism.

Sen. Jim Bunning, Kentucky Republican, said on Friday that the administration’s plan will “take away the free market and institute socialism in America.” House Minority Leader John A. Boehner, Ohio Republican, said he was “furious that we’re in this situation.”

But anger among conservatives was not expected to pose any serious threat to the plan’s passage.

“No member has said they’d vote against this proposal yet, because everyone is starting to understand the gravity of the situation,” said a senior congressional staffer with knowledge of the talks. In the Rose Garden, Mr. Bush defended his conservative credentials and ridiculed free-market purists as peddling “creative destruction.”

“I’m sure there are some of my friends out there saying, ‘I thought this guy was a market guy. What happened to him?’” Mr. Bush said. “Well, my first instinct wasn’t to lay out a huge government plan.

“My first instinct was to let the market work until I realized, upon being briefed by the experts, of how significant this problem became. And so I decided to act and act boldly,” Mr. Bush said.

“This wasn’t going to be contained to just the financial community. This problem would spread to the average citizen,” Mr. Bush said.

The plan announced Friday by Treasury Secretary Henry M. Paulson Jr. capped off a historic and breathtaking week of developments, as the government made several dramatic moves to stave off an economic catastrophe.

The week began with the news that the government would not bail out the venerable investment bank Lehman Brothers and that Merrill Lynch had been forced to sell itself to Bank of America. By Tuesday, insurance giant American International Group was on the verge of collapse, and the Treasury responded by essentially nationalizing the entity with an $85 billion loan. Stock market losses prompted the Federal Reserve to inject $180 billion into the global market.

That sparked a brief rally in the market but Mr. Paulson and Fed Chairman Ben S. Bernanke met with Mr. Bush on Thursday afternoon and pushed for the option of last resort, which is the plan now being pushed through Congress. The president, however, was clear that the government is making a gamble.

“There is going to be hundreds of billions of dollars at risk,” Mr. Bush said, during a Rose Garden statement with Colombian President Alvaro Uribe on Saturday morning that turned into an unscheduled press conference.

But the president said that “over time, we’re going to get a lot of the money back” and that the cost of not doing anything would have been worse.

“I believe this is going to work,” he said. “In the long run, we’re going to be fine. We’ll get through this.”

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