- The Washington Times - Thursday, September 25, 2008

President Bush pulled out all the stops to sell his economic bailout to a skeptical public and Congress Wednesday, telling a national TV audience that millions of jobs could be lost if the plan is not approved and summoning the two presidential contenders to a White House summit with congressional leaders Thursday.

“These are not normal times,” Mr. Bush said in a sober, 12-minute address to the nation, his first such address in more than a year.

“The markets are not functioning properly. There is a widespread loss of confidence,” he said, adding that if a version of his $700 billion bailout package is not approved quickly, “America could slip into a financial panic.”

Sen. John McCain already had shaken up the election earlier in the day by suspending his presidential campaign to deal with the market crisis and threatening to cancel Friday’s first debate. Both he and Sen. Barack Obama indicated they would accept the White House invite for the 3:55 p.m. meeting.

The two candidates also issued a joint statement urging support for a deal to end the crisis.

“Now is a time to come together, Democrats and Republicans, in a spirit of cooperation for the sake of the American people,” the statement said. “The plan that has been submitted to Congress by the Bush administration is flawed, but the effort to protect the American economy must not fail.”

The intense political maneuvering came as congressional leaders worked into the night to agree on a bill implementing the bailout plan before the scheduled adjournment this weekend.

A Democratic Party source, speaking on the condition that he not be identified, told The Washington Times that the sides were already close to agreement on a bill and said he hoped they would be able to complete a final draft of the bill at the White House session.

Separately on Wednesday night, Sen. Christopher J. Dodd, Connecticut Democrat and Senate banking committee chairman, said at a Capitol Hill news conference that there was a “good possibility” a deal could be reached “within the next day or so.”

Mr. Bush, returning to Washington after cutting short a visit to the U.N. General Assembly in New York, said in his White House address that his “natural instinct” was to oppose the idea of governments bailing out private firms in a free-market economy.

But he said the financial danger was so severe that failing to intervene could have led to a far greater economic crisis, and he insisted the plan was not designed to bail out of Wall Street bankers or individual firms, but was “aimed at preserving the overall economy.”

“With the situation becoming more precarious by the day, I faced a choice: to step in with dramatic government action or to stand back and allow the irresponsible actions by some to undermine the financial security of all,” Mr. Bush said.

Without the package, “more banks could fail, including some in your neighborhood; the stock market could drop even more, affecting your retirement; the value of your home could plummet, foreclosures would rise dramatically,” he said. “Businesses will close their doors, millions could lose their jobs.”

The president also set out a number of principles for the bill, including several modifications that already have been negotiated since the package was proposed last week. He said the bill should “ensure that taxpayers are protected” and make sure that “failed executives do not receive a windfall,” reflecting a key concession that members of Congress had wrung from Treasury Secretary Henry M. Paulson Jr., the plan’s chief architect. Earlier, support had been growing for a smaller initial down payment on the plan, perhaps of $150 billion, that the new Congress could reconsider in early 2009. Mr. Paulson, who has pushed for maximum “flexibility” for the Treasury, called that idea a “grave mistake.” Mr. Bush also called for bipartisan oversight of the operation of the bailout, a measure agreed to earlier in the week. And he predicted that most if not all of the $700 billion would be recovered as the economy got back on its feet.

That series of concessions was trumpeted in statements after the speech by Mr. Obama, House Speaker Nancy Pelosi and other top Democrats.

The stock market reacted moderately to the Washington drama early in the day, after registering the biggest two-day drop in six years to start the week. The Dow Jones index of industrial stocks was down 29.00 points to 10,825.17. The Standard & Poor’s 500 index lost 2.35 points, or 0.20 percent, to close at 1,185.87, and the Nasdaq Composite Index rose 2.35 points, or 0.11 percent, to close at 2,155.68.

In suspending his campaign, Mr. McCain also called for a postponement of Friday’s first debate with Mr. Obama because of the severity of the nation’s economic troubles. The debate was to focus on foreign policy and national security.

“It has become clear that no consensus has developed to support the administration’s proposal,” Mr. McCain said. “I do not believe the plan on the table will pass as it currently stands, and we are running out of time.”

Both Mr. Obama and the U.S. Commission on Presidential Debates, which is organizing the debate in Oxford, Miss., immediately rejected Mr. McCain’s call for a delay, though the McCain campaign responded that their refusal would not affect the Arizona senator’s plans.

“It’s going to be part of the president’s job to deal with more than one thing at once,” Mr. Obama told reporters in Clearwater, Fla.

While Congress struggled with the Wall Street crisis, the House did manage to pass a $630 billion stopgap spending bill to keep the federal government operating into March. The bill includes money for the Pentagon and a $25 billion aid package for struggling U.S. automakers.

House Financial Services Committee Chairman Barney Frank and Mr. Dodd are trying to fashion a single bill that would expedite passage in both chambers before this week’s scheduled adjournment.

“We’re focusing on trying to make sure the Senate and the House are in synch,” said Mr. Frank, Massachusetts Democrat.

The three-page emergency Treasury proposal given to lawmakers over the weekend is now a 42-page draft bill that would give the Treasury secretary broad authority and a massive war chest to buy up troubled mortgages and mortgage-based securities assets with plunging values that have threatened to paralyze the U.S. and global credit markets.

A beleaguered Mr. Paulson, enduring a second straight day of lengthy and skeptical questioning from lawmakers, stood firm against one idea included in the Democratic draft and endorsed by a number of private economists. They want the government to demand an ownership stake in the financial companies that accept federal aid, giving taxpayers a chance to profit if the rescue plan boosts share prices.

But Mr. Paulson, a former Goldman Sachs chief executive, told the House Financial Services Committee that the equity idea would undercut a key plank of the plan to get as many banks and commercial lenders as possible to participate.

A day after a five-hour grilling before the Senate Banking, Housing and Urban Affairs Committee, Mr. Paulson and Federal Reserve Chairman Ben S. Bernanke were again in the hot seat, testifying before the House panel while Mr. Bernanke also did a solo turn before the Joint Economic Committee.

The two heard repeated complaints that the Wall Street bailout was proving massively unpopular with voters back home. “You have a credibility problem with the American people,” said Rep. Gregory W. Meeks, New York Democrat.

But Mr. Bernanke argued that the rescue operation was designed to get banks lending again and restore confidence in the markets generally. Small businesses, farmers, retirees and young families would all suffer the consequences if the government failed to act, he predicted. Asked whether pension plans and individual 401(k) savings plans would be hurt if Congress failed to act, the Fed chairman replied: “Very likely.”

Mr. Bernanke and Mr. Paulson met with more than 20 Democratic senators for about two hours early Wednesday evening. Democratic leaders said later that the meeting was constructive but that no decisions had been made.

“I realize speed is important, but I think my colleagues are also far more concerned about getting this right, and that’s our intention and our goal,” Mr. Dodd said.

Senate Majority Leader Harry Reid, Nevada Democrat, added that congressional staffs “will work all night” on the deal.

Key lawmakers said that although the plan is not popular, most members appear resigned to voting for the final bill. Sen. Charles E. Schumer, chairman of the Joint Economic Committee, said, “With the exception of a few outliers on either side, there is clear recognition among members of both parties that we must act and act soon.”

Mr. Paulson and Mr. Bernanke repeatedly stressed that the ultimate cost of the bailout to taxpayers was likely to be far less than $700 billion, as the government sells off the “toxic assets” that right now can’t be unloaded at any price.

“The risk to the taxpayer, while not trivial, is far less than the purchase amount,” Mr. Bernanke said.

Jon Ward contributed to this report.

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