- The Washington Times - Sunday, September 28, 2008

UPDATED:

Presidential candidates Barack Obama and John McCain said they planned to vote for the financial bailout package devised last night.

Speaking on Sunday talk shows, the senators said they supported what they know of the plan’s outline and would look more closely at its details.

Both presidential candidates said the bailout appeared to meet their priorities.

Asked on ABC News’ “This Week” if his principles had been met, Mr. McCain replied, “Yes, protect the taxpayer, make sure there isn’t excessive compensation for CEOs, an oversight body, not leaving all the decisions in the hands of one individual.” The last priority was a reference to Treasury Secretary Henry M. Paulson Jr., whose initial bailout proposal would have given him extraordinary powers that would have been “non-reviewable.”

Asked if he would support a second economic stimulus package, which Mr. Obama is pushing, Mr. McCain said: “First of all, let’s get this [bailout] off the table. Let’s get this deal done, signed by the president, and get moving, because the real effect of this is going to restore some confidence, and get some credit out there, and get the economic system moving again, which is basically in gridlock today.”

Appearing on CBS News’ “Face the Nation,” Mr. Obama said, “It appears that some core principles I set forth at the beginning of the crisis were incorporated.” He cited the need for congressional oversight, taxpayer protection, help for homeowners facing foreclosure and limiting executive compensation.

“My inclination is to support it because Main Street is at stake,” Mr. Obama said. Calling the turmoil engulfing the financial markets “probably the most serious financial crisis we have faced since the Great Depression,” Mr. Obama described the bailout as “a final verdict on eight years of failed economic policy.”

The $700 billion financial-system bailout agreement reached early Sunday “puts taxpayers first in line to recover assets if [a] participating company fails [and] guarantees taxpayers are repaid in full — if other protections have not actually produced a profit,” according to a summary of the draft proposal released by House Speaker Nancy Pelosi Sunday morning.

“If the government loses money, the financial industry will pay back the taxpayers,” the summary sheet declared.

Mrs. Pelosi also reported that there will be “four independent oversight entities or processes to protect the taxpayer,” including a strong oversight board appointed by bipartisan leaders of Congress.

The Government Accountability Office, the investigative arm of Congress, will maintain a presence at the Treasury Department “to conduct audits and ensure strong internal controls,” the document said. The agreement also calls for an independent inspector general “to monitor the Treasury secretary’s decisions.” There will also be “meaningful judicial review” of the Treasury secretary’s actions. The agreement will also require that all transactions be posted on the Internet, Mrs. Pelosi’s summary sheet reported.

Appearing on C-SPAN’s “Washington Journal” on Sunday morning, Rep. Barney Frank, the chairman of the House Financial Services Committee, who played a leading role in negotiations with the administration, predicted that the bailout legislation “will get a majority but not a huge majority” vote in the House, which will conduct a vote on the package Monday.

Mr. Frank said there was “no way” the bailout would “come close” to costing the full $700 billion. He said the bailout would likely cost “well less than $100 billion” and “maybe $100 billion in the worst case.” In any event, Mr. Frank said, the agreement called for the government to get stock warrants from the companies being bailed out. The warrants would be “a way for the federal government to get its money back,” he said.

— David Dickson and Jeffrey H. Birnbaum

… … … …

Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.

House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper.

“We’ve still got more to do to finalize it, but I think we’re there,” said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.

“We worked out everything,” said Sen. Judd Gregg, R-N.H., the chief Senate Republican in the talks. He said the House should be able to vote on it Sunday, and the Senate could take it up Monday.

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

At the insistence of House Republicans, some money would be devoted to a program that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults.

The legislation would place limits on severance packages for executives of companies that benefit from the rescue plan, but details were sketchy.

Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies’ future profits.

To help struggling homeowners, the plan requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers’ monthly payments so they can keep their homes.

The measure’s main elements were proposed a week ago by the Bush administration, with Paulson heading efforts to push it through the Democratic-controlled Congress. Democrats insisted on greater congressional oversight, more taxpayer protections, help for homeowners facing possible foreclosure, and restrictions on executives’ compensation.

To some degree, all those items were added.

At the insistence of House Republicans, who threatened to sidetrack negotiations at midweek, the insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout.

But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make credit sufficiently available. The department would decide how to structure the insurance provisions, said Sen. Kent Conrad, D-N.D., one of the negotiators.

Money for the rescue plan would be phased in, he said. The first $350 billion would be available as soon as the president requested it. Congress could try to block later amounts if it believed the program was not working. The president could veto such a move, however, requiring extra large margins in the House and Senate to override.

Despite the changes made during an intense week of negotiations, the heart of the program remains Bush’s original idea: To have the government spend billions of dollars to buy mortgage-backed securities whose value has plummeted as hundreds of thousands of Americans have defaulted on their home loans.

Senate Majority leader Harry Reid, D-Nev., said Saturday that the goal was to come up with a final agreement before the Asian markets open Sunday night. “Everybody is waiting for this thing to tip a little bit too far,” he said, so “we may not have another day.”

Hours later, when he and others told reporters of the plan in a post-midnight news conference, Reid referred to the sometimes testy nature of the negotiations.

“We’ve had a lot of pleasant words,” he said, “and some that haven’t always been pleasant.”

“We’re very pleased with the progress made tonight,” said White House spokesman Tony Fratto. “We appreciate the bipartisan effort to deal with this urgent issue.”

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