Bailout deal reached; House to vote today

WASHINGTON -- Congressional leaders and the White House agreed Sunday to a $700 billion rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote today.

The plan, muddled for days by election-year politics, would give the administration broad power to use billions upon billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

President Bush called the vote a difficult one for lawmakers but said he is confident Congress will pass it. "Without this rescue plan, the costs to the American economy could be disastrous," Bush said in a written statement released by the White House.

Pitching the deal

A deal in hand, Capitol Hill leaders scrambled to sell it to colleagues in both parties and acknowledged they were not certain it would pass. "Now we have to get the votes," said Sen. Harry Reid, D-Nev., the majority leader.

Rep. John Boehner, R-Ohio, the House minority leader, said he was urging "every member whose conscience will allow them to support this" to back it, but officials in both parties expected the vote to be a nail-biter.

"This isn't about a bailout of Wall Street, it's a buy-in, so that we can turn our economy around," said House Speaker Nancy Pelosi, D-Calif.

The largest government intervention in financial markets since the Great Depression casts Washington's long shadow over Wall Street. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

"I don't know of anyone here who wants the center of the economic universe to be Washington," said a top negotiator, Sen. Chris Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee. But, he added, "The center of gravity is here temporarily. ... God forbid it's here any longer than it takes to get credit moving again."

The plan would let Congress block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification -- and subject to a congressional resolution of disapproval.

Some lawmakers hesitant

As Bush's team stepped up its efforts to corral reluctant Republicans, the White House released a letter from his budget chief, Jim Nussle, to Boehner saying the measure would cost taxpayers "considerably less" than its eye-popping $700 billion total.

Democratic leaders have made it clear they will not support the rescue unless a substantial number of Republicans join them.

"It will take two to make this work," said Rep. Rahm Emanuel, D-Ill.

Rep. Joe Barton, R-Texas, an opponent, estimated that half the House's Republicans are "truly undecided."

"If we do not do this, the trauma, the chaos and the disruption to everyday Americans' lives will be overwhelming, and that's a price we can't afford to risk paying," said Sen. Judd Gregg, the chief Senate Republican in the talks.

Rep. Barney Frank of Massachusetts, the House Financial Services Committee chairman, predicted the measure would pass, though not by a large majority.

"It's not a bill that any one of us would have written. It's a much better bill than we got. It's not as good as it should be," he said.

The breakthrough

A breakthrough came Saturday night, with the addition of a requirement sought by centrist Democrats and Republicans to ensure that the government be paid back by companies that got help. The president would have to tell Congress after five years how he planned to recoup the losses.

Another key bargain -- this time to draw Republican support -- allows, but doesn't require, government to insure some bad home loans rather than buy them. That's designed to limit the amount of federal money used in the rescue.

The rescue would only be open to companies who deny their executives "golden parachutes" and limit their pay packages. Firms that got the most help through the program -- $300 million or more -- would face steep taxes on any compensation for their top people over $500,000.

The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in recipients' future profits.

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

Presidential candidates weigh in

Sens. John McCain and Barack Obama on Sunday expressed cautious support for the bailout, though both reserved the right to change their minds after they have reviewed details of the hastily arranged deal.

McCain said he will "swallow hard and go forward" with the plan, adding that it is time to "get this deal off the table, let's get this to the president."

McCain, who rushed back to Washington last week to help Congress reach a deal, said Sunday that "the option of doing nothing is simply not an acceptable option."

Obama called the need for a bailout "the culmination of a sorry period in our history, in which reckless speculation and greed on Wall Street and lax oversight from Washington led to a meltdown of our financial markets."

Obama said that as president he would order a review of the bailout plan to make sure it meets the principles he sought, including strict oversight and limits on executive pay. But he said a failure to approve it would have "devastating consequences" for the U.S. economy.