Hill Clashes on Rescue Plan; Dollar Drags Down Markets
Tuesday, September 23, 2008
Democratic leaders said they were near agreement with the Bush administration yesterday on key provisions of a massive plan to revive the U.S. financial system, but the two sides remained at odds over other issues and were struggling to gain the support of rank-and-file lawmakers on both sides of the aisle.
Although the White House has warned of severe consequences if the bailout plan is not approved by Friday, lawmakers crafting the measure said their work may well stretch past that deadline.
The Bush administration is resisting changes to the measure being sought by Democratic leaders and many Republicans, including one that would grant the government authority to cut executive pay at firms that participate in the bailout and another that would guarantee that taxpayers share in the profits if those firms recover financially.
Meanwhile, rank-and-file lawmakers -- returning to Washington after a weekend in their districts -- voiced outrage that taxpayers were being asked to pay for the excesses of Wall Street and that Congress was being prodded to rubber-stamp the biggest federal intervention in the private market since the Great Depression. While Democratic leaders said they could embrace the bailout plan with certain modifications, a growing minority of lawmakers were starting to question the very premise of the Treasury Department's proposal.
Sen. Richard C. Shelby (Ala.), the ranking Republican on the Senate banking committee, yesterday issued a statement saying he was "concerned" that the bailout plan was "neither workable nor comprehensive, despite its enormous price tag.
"In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts," Shelby said, urging Congress to "immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion."
Lobbyists have swarmed Capitol Hill to press lawmakers for changes to the legislation. Representatives of community advocacy groups from around the country yesterday appealed to Federal Reserve Chairman Ben S. Bernanke to include homeowners in the bailout.
Despite the pressures, Rep. Barney Frank (D-Mass.), who is taking the lead for Democrats in talks with Treasury Secretary Henry M. Paulson Jr., insisted that the measure was moving forward.
"There was nothing on Friday. There was a bill on Saturday. There's a lot more agreement today than there was on Saturday. So a great deal of progress has already been made," said Frank, who chairs the House Financial Services Committee.
Frank said Paulson agreed to government oversight of the bailout program, including an independent board that would monitor the expenditure of $700 billion to take troubled mortgage-related assets off the books of faltering firms. The three-page proposal Paulson gave lawmakers over the weekend would have permitted him to run the program without review by other federal agencies or the courts.
Frank said Paulson also agreed that the Treasury should use its power as the new owner of billions of dollars in mortgage-backed assets to assist homeowners at risk of foreclosure. Democrats are pressing for provisions to require the Treasury to force banks to rewrite bad loans for struggling homeowners and to forgive a portion of their debt, using programs at the Federal Housing Administration and other agencies.
Treasury officials confirmed that they were in talks on those issues and were "making good progress." However, big disagreements remain, both sides said.