- The Washington Times - Saturday, September 27, 2008

Treasury Secretary Henry M. Paulson Jr. huddled with top congressional negotiators Saturday night as hopes surged at both ends of Pennsylvania Avenue that talks on a bill to finance the $700 billion Wall Street rescue plan were back on track and a deal could be cut before late Sunday’s opening of Asian financial markets.

The House Rules Committee began clearing the legislative decks for a floor debate as early as Sunday, while President Bush and senior lawmakers of both parties said there had been marked progress after talks seemed on the verge of collapse just 48 hours earlier.

Senate Minority Leader Mitch McConnell told reporters there was a “widespread feeling that we are making progress,” after staffers for the key negotiators met until nearly 2 a.m. Saturday trying to nail down the broad outlines of a bill.

“Hopefully, a deal can be reached over the weekend,” the Kentucky Republican said.

President Bush in his weekly radio address said he was “confident that we will pass a bill to protect the financial security of every American very soon.”

But House Republicans, whose rebellion last week against the unpopular bailout deal raised doubts that a bill could be passed, were more circumspect.

“It’s important that we move, but it’s more important that we move with discretion,” House Minority Leader John A. Boehner, Ohio Republican, told reporters at midafternoon, just ahead of the meeting with Mr. Paulson. “There are still a lot of issues on the table,” he said.

The bailout battle spilled over into the presidential campaign. Republican nominee Sen. John McCain, whose personal intervention in last week’s bailout deliberations attracted sharp scrutiny, flew back to Washington early Saturday morning, leaving Mississippi almost immediately after his Friday night debate with Democratic rival Sen. Barack Obama.

The economic crisis dominated the opening of the debate, with both candidates saying they hoped to be able to support the final bill, given the seriousness of the Wall Street panic and its potential effect on consumers and small businesses on Main Street.

Mr. McCain and Mr. Obama, who was campaigning in North Carolina, were keeping tabs on the congressional debate and talking to wavering lawmakers about the shape of the final bill, the two campaigns said.

Senate Majority Leader Harry Reid said negotiators are acutely aware that global markets are watching the Capitol Hill drama to see if relief is on the way for the frozen U.S. credit markets.

“Everybody is waiting for this thing to tip a little too far,” Mr. Reid said, “so we may not have another day” after the markets reopen. Leading Senate Republicans, including Sen. Judd Gregg of New Hampshire and Sen. Robert Bennett of Utah, have seconded the urgent need for action.

But many conservatives, especially in the House, are incensed over the central thrust of Mr. Paulson’s plan — using taxpayer money to buy up bad mortgage loans and mortgage-backed securities — and pushed their own alternative at a contentious White House summit Thursday.

Republican lawmakers also objected to what they described as a pet Democratic amendments they say are being tacked onto the rescue plan.

House Speaker Nancy Pelosi said Democrats back a provision that would charge a fee to banks who are bailed out in the program, if after five years the government determines taxpayers have lost money. Another amendment would give labor unions shareholder voting rights on issues affecting any company that participates in the rescue plan.

“This is a handout to the Democrats’ labor friends, and it has no business being in this bill,” said Kevin Smith, spokesman for Mr. Boehner.

The original three-page administration plan proposed by Mr. Paulson has undergone major changes in the legislative mill, growing to a draft bill of more than 100 pages.

Lawmakers have demanded strict oversight of the program, and Mr. Paulson will have the authority to spend only $350 billion in the first wave of bad-debt buyouts. Congress will have a veto over the second batch of $350 billion if the Treasury requests it.

Lawmakers also have imposed limits on salaries for bankers and financial executives whose firms are bailed out. They also want provisions giving the government the right to buy ownership stakes in the companies being rescued, so taxpayers could benefit if the share prices rise down the road.

A senior House Democratic aide said the emerging compromise would include the House GOP plan — which involves having the federal government insure the troubled mortgages and securities that are choking the U.S. credit markets — as an “option” available to the administration as it implements the rescue plan.

“We’re going to accommodate the reasonable concerns of House Republicans,” said Mr. Gregg, the leading Senate Republican negotiator in the talks.

But the core of the program remains what is being called “Paulson-plus,” the original Treasury proposal with the changes and restrictions largely offered by Democrats.

In one concession, Democrats have dropped efforts to include a provision easing bankruptcy laws to help struggling homeowners — an idea fiercely opposed by the mortgage lending industry.

House Financial Services Committee Chairman Barney Frank and other Democrats on Capitol Hill have been scathingly critical of Mr. McCain’s role in the talks, but many Capitol Hill Republicans credit him with giving them a seat at the table when their concerns seemed about to be ignored.

“I think John McCain did us a big favor by coming back to Washington,” said Rep. Roy Blunt, Missouri Republican, the House minority whip.

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