Sweeping Bailout Bill Unveiled
House Set to Vote Today, Senate to Follow
Monday, September 29, 2008
After a week of political tumult and deepening economic anxiety, congressional leaders yesterday rallied support for an historic proposal that would grant the government vast new powers over Wall Street and offer fresh help to homeowners at risk of foreclosure.
The proposed legislation, which is scheduled for a vote today in the House, would authorize Treasury Secretary Henry M. Paulson Jr. to initiate what is likely to become the biggest government bailout in U.S. history, allowing him to spend up to $700 billion to relieve faltering banks and other firms of bad assets backed by home mortgages, which are falling into foreclosure at record rates.
The plan would give Paulson broad latitude to purchase any assets from any firms at any price and to assemble a team of individuals and institutions to manage them. In wielding those powers, Paulson and others hope to contain a crisis that already has caused the failure or forced the rescue of a half-dozen major Wall Street firms and unnerved markets around the world.
The measure was forged during a marathon negotiating session between lawmakers from both parties and Paulson -- who at one point appeared to negotiators to be on the verge of collapse. Restive Republican lawmakers originally criticized the package as putting taxpayers at risk and violating free-market principles, but many of them appeared yesterday to be dropping their opposition.
House Minority Leader John A. Boehner (R-Ohio) emerged last night from a meeting of House Republicans to say he is "encouraging every member whose conscience will allow them to support this." Boehner said he and other GOP leaders made the case that negotiators had improved the bill by gaining a key concession on a plan to limit taxpayer exposure.
A vote in the Senate could take place as soon as Wednesday.
President Bush last night released a statement praising the measure. Although it has been panned as a massive bailout for Wall Street financiers, Bush argued the bill would have broad benefits for ordinary families and business owners who need "access to credit" to "make purchases, ship goods and meet their payrolls."
"This plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system," Bush said. "Without this rescue plan, the costs to the American economy could be disastrous."
Bush has stressed that the ultimate cost of the bailout would be much less than $700 billion because the government would eventually sell the assets it purchases and recover most, if not all, of its investment.
Still, he acknowledged yesterday that the measure presents lawmakers with "a difficult vote" barely a month before the November elections. Polls show the bailout is hugely unpopular, and lawmakers have been inundated with calls and e-mails from angry constituents. With investors hanging on every twist of the debate in Washington, leaders in both chambers predicted that the bill would pass.
"If we do this and it works right, it's most likely that people will never appreciate how close we came to the brink. So there's not much political upside to this," said Sen. Judd Gregg (R-N.H.), the lead negotiator for Senate Republicans. But lawmakers are ready to support the bill, Gregg said, because they know "we are facing a crisis of proportions that are almost incomprehensible."
The scope of the crisis was laid out 11 days ago during a late-night meeting in the Capitol where Paulson and Federal Reserve Chairman Ben S. Bernanke warned lawmakers that an imminent meltdown in financial markets threatened to destroy the wealth and jobs of millions of Americans. Two days later, Paulson presented lawmakers with a three-page economic rescue plan that would have granted the Treasury nearly unfettered power to shore up the nation's financial system, unchecked by federal or judicial review.