Lawmakers Reach Accord On Huge Financial Rescue
Sunday, September 28, 2008
Congressional leaders and the Bush administration this morning said they had struck an accord to insert the government deeply into the nation's financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages.
House and Senate negotiators from both parties emerged with Treasury Secretary Henry M. Paulson Jr. from a marathon session in the Capitol at 12:30 a.m. to announce that they had reached agreement on a proposal to give Paulson broad authority to organize one of the biggest government interventions in the private sector since the Great Depression.
Full details of the plan were not immediately available. Lawmakers said their staffs would be working through the night.
"We've made great progress, but we have to commit it to paper before we can formally agree, " House Speaker Nancy Pelosi (D-Calif.) said. Her office began procedures to hold a vote as soon as tomorrow.
"We've been working on this a long time, we've still got more to do to finalize it, but I think we're there. . . . So far, so good," Paulson said. The Senate is likely to take up the measure soon after the House approves it.
A senior administration official, who requested anonymity to speak freely about the plan, said it would include limits on executive compensation to companies participating in it, primarily by reducing tax deductions if they pay their executives more than $400,000 a year. Also, the money would be parceled out to the Treasury, rather than given in one $700 billion chunk.
Democrats gave up demands to have bankruptcy judges be allowed to lower mortgage payments on primary residences for people in foreclosure. They also gave up funding for a housing program that Republicans thought would help liberal groups associated with Democrats, the official said.
Under the plan, first put forward by the Bush administration in a late-night meeting with lawmakers just 10 days ago, Paulson would be authorized to purchase mortgage-backed assets from struggling firms in hopes of easing a credit crunch that has pushed global markets to the brink of collapse.
With home prices plummeting, many of those assets are now almost worthless, and investors have lost confidence in many of the firms that hold them. That has undermined some of the biggest names on Wall Street and caused banks to stop lending money, sparking a credit crisis that threatens to deliver a devastating blow to businesses, consumers and the broader economy.
Administration officials have stressed that the ultimate cost of the bailout would be much less than $700 billion because the government would eventually sell the assets it purchased and recover most, if not all, of its investment.
Yesterday's talks, conducted mainly in Pelosi's suite of offices on the second floor of the Capitol, were focused heavily on how to cover the cost of the program so taxpayers don't get stuck with the bill.
Democrats pressed hard for further taxpayer protections, including a fee that would be imposed on the financial services industry if after five years the government had not fully recouped its money. The proposal, which did not surface in negotiations until yesterday, would help win the support of a fiscally conservative group of House Democrats known as the Blue Dogs, an important bloc of 47 votes.