- The Washington Times - Thursday, September 25, 2008

With the two men who want to succeed him sitting close by, President Bush on Thursday convened a historic, high-stakes summit to sell his $700 billion Wall Street bailout package, but the meeting produced fresh acrimony without clinching a deal on the rescue plan.

Congressional leaders negotiated into the night with Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Board Chairman Ben S. Bernanke on the Hill hoping most especially to overcome objectives by conservative House Republicans about the size and scope of the package.

“If we get support from House Republicans, this could all be done in a couple of days,” Senate Majority Leader Harry Reid said.

Adding urgency to the crisis, a trio of new reports showed a rapidly weakening U.S. economy. Orders for long-lasting U.S. manufactured goods and sales of new homes plunged in August while jobless claims shot up last week to their highest level in seven years, according to the government.

New home sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991. It was a substantially bigger sales decline than the 1 percent drop that economists had been expecting.

Wall Street had a generally good day Thursday based on early reports that a deal was imminent, but investors braced for the possibility of markets opening without a bailout in place.

The stalemate over the bailout also continued to loom over the first presidential debate between Republican Sen. John McCain and Democratic rival Sen. Barack Obama, both of whom attended the summit in the White House Cabinet Room.

Mr. McCain, who suspended his campaign Wednesday to deal with the Wall Street implosion, has called for a postponement of Friday night’s debate on foreign policy and national security issues, but Mr. Obama has insisted he wants the debate to proceed.

“One of us will inherit this mess in four months,” Mr. Obama said, adding that the American people should hear where he and Mr. McCain stand on the issues

Participants in the White House meeting described a number of contentious moments, and Mr. Reid said the White House meeting had actually set the negotiations back.

Read story “Bush, McCain, Obama have historic west wing huddle” here

At one point, Alabama Sen. Richard Shelby, ranking Republican on the Senate banking committee and a bailout opponent, waved a sheaf of letters he said were from top economists who insist the Treasury plan would not work.

At another point, Mr. Paulson, the prime architect of the bailout deal, pleaded with Democrats at the meeting not to “blow this up,” ABC News reported.

But Democrats in the meeting also were fuming afterward, saying the meeting was a step back from a bipartisan “fundamental agreement” on the principles for a draft bill they announced with great fanfare earlier in the day.

The White House meeting “looked like a rescue plan for John McCain for two hours, and it took us away from the work we were trying to do,” said Sen. Christopher J. Dodd, Connecticut Democrat and banking committee chairman. He complained in an interview on CNN that Republicans floated an entirely new rescue plan at the White House meeting.

But a spokesman for House Minority Leader John A. Boehner, Ohio Republican, accused Democratic Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi of trying to hustle their preferred bill through Congress.

“I think Pelosi and Reid, going into the White House meeting, jammed the proposal down everyone’s throat to ensure that Sen. McCain was not seen as part of the bipartisan solution,” said Kevin Smith, a spokesman for Mr. Boehner.

Mr. McCain and Mr. Obama sat on opposite sides of a long conference table in the White House Cabinet Room, along with top congressional leaders. Neither spoke as Mr. Bush made brief comments for the television cameras at the start of the meeting.

The country will be in “a serious economic crisis if we don’t pass a piece of legislation,” Mr. Bush said. “My hope is that we can reach an agreement very shortly.”

The extraordinary joint appearance of the presidential candidates was designed in part to provide political cover for both parties in a difficult vote. Mr. McCain said he was still trying to help strike a deal, acknowledging it was not a popular measure with voters right now.

“It that hurts me politically, I will gladly take the penalty,” he said.

But doubts have already emerged on Capitol Hill whether rank-and-file members would line up behind the deal. Mr. Obama said afterward he was closely following the bailout talks and still hoped for a deal, but added he was leery of bringing “presidential politics” into the delicate negotiations.

“Both myself and Sen. McCain have to be very careful about how we inject ourselves in the process,” he said.

Both parties face rebellious factions within their own ranks over the bailout bill, which presents a huge tab to taxpayers to pay for Wall Street excesses just weeks before Election Day.

Mr. Obama told reporters later that the main tension in the White House meeting was between Mr. Bush and House Republicans, many of whom bitterly oppose the bailout.

Rep. Peter King, New York Republican, said on CNBC that he thought a “solid number” of Republicans would eventually fall in line behind a compromise deal, but other Republican leaders said privately that there are fewer than three dozen sure Republican votes for the proposal.

But congressional Democrats in turn are demanding sizeable Republican support on the final vote, fearing they will be exposed politically if they have to supply the votes to pass the unpopular plan.

Mr. Shelby, who has been openly skeptical of the bailout deal, said at the White House he would oppose any deal.

“It will not solve the problem. It will create more problems. We are rushing to judgment,” Mr. Shelby said.

Republicans and Democrats from the key House and Senate committees had struck a far more hopeful tone earlier in the day, saying the agreement on basic principles could clear the way for a bill to be voted on within a matter of days, according to Mr. Dodd.

In one key change, lawmakers are proposing to give the Treasury Department just half of the $700 billion authorization that Mr. Bush requested up front, with Congress having a veto over further authority to buy up failed mortgages.

Republican Sen. Robert Bennett of Utah predicted the plan would pass.

“I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is still roiling in the markets,” Mr. Bennett said.

But other key Republicans were far more leery, even as Mr. McCain traveled to Capitol Hill to speak to Republicans about the deal.

Conservative House Republicans have been particularly scathing of the plan and have even floated an alternative package. Mr. Boehner, who did not take part in the final negotiations, made clear that more hard bargaining lay ahead.

“There is no bipartisan deal at this time,” the Ohio Republican said shortly after Mr. Dodd’s announcement. “There may be a deal among some Democrats, but House Republicans are not a part of it.”

House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, said he believed that many concerns expressed by House Democrats had been addressed in the agreement.

“We are on track to pass this. The market should be calmed down,” he said.

Mrs. Pelosi acknowledged that taxpayers were “justifiably concerned and vocal” over the size and scope of the rescue plan for Wall Street. Lawmakers report being flooded with complaints from constituents about the Wall Street bailout.

Word of a possible deal cheered investors, with the Dow Jones industrial index up nearly 200 points for the day — the U.S. market’s first positive session of the week.

As widely expected, the bill will include new restrictions on pay for executives of companies that receive federal aid and a larger congressional say in when the money can be spent, provisions the administration 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.

Absent a massive government intervention to deal with the bad assets, the nation faces “a long and painful recession,” Mr. Bush said in a prime-time address Wednesday night to the nation.

• Don Lambro and Sean Lengell contributed to this report.

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