WASHINGTON — The Bush administration and Congress anxiously revived negotiations Friday on a $700 billion financial bailout, one day after the largest bank collapse in U.S. history provided a brutal reminder of the risks of failure. Democrats talked optimistically of agreement by the end of the weekend.
“I’m convinced that by Sunday we will have an agreement that people can understand on this bill,” predicted Massachusetts Rep. Barney Frank, a key Democrat in eight days of up-and-down talks designed to stave off an economic disaster.
House Speaker Nancy Pelosi added that “progress is being made,” although the day came and went without senior lawmakers from both parties sitting down together.
Neither she nor Frank divulged details at a late-afternoon news conference in the Capitol, though there was word of one fresh Democratic concession.
Pelosi told fellow Democrats during a closed-door meeting that the idea of letting judges rewrite mortgages to help bankrupt homeowners avoid foreclosure won’t be a part of the emergency legislation. That provision, pushed by several Democrats, would be a deal-breaker for Republicans whose votes are needed to pass the measure, she said, according to lawmakers at the meeting.
Democrats and Bush administration officials also said they were willing to include House Republicans’ idea of having the government insure distressed mortgages — but only as an option, rather than a replacement for the administration’s more sweeping approach.
Democratic and Republican staff aides met into the night on Capitol Hill. They were going line by line through legislative proposals in an attempt to clear the way for lawmakers to bargain over the weekend, even as presidential contenders John McCain and Barack Obama agreed during their presidential debate Friday night that Congress must act soon.
Asked directly whether he intends to vote for a rescue plan taking shape in Congress, McCain said, “I hope so. … sure.”
“We haven’t seen the language yet,” Obama said. “I do think there is constructive work being done.”
Meanwhile, new details emerged of a remarkably tumultuous White House meeting on Thursday. With the session breaking up in disarray, according to two participants, President Bush issued an appeal, saying, “Can’t we just all go out and say things are OK?” The group around the table, congressional leaders as well as McCain and Obama, spurned the presidential request for a publicly united front.
Earlier in the White House meeting, Democrats peppered House Republican leader John Boehner of Ohio with questions about the details of an alternative he was backing. “‘I don’t know what the hell they are,’ Bush said at one point,” recalled one person who was in the room.
Bush sought to coax the talks back to life on Friday, prodding lawmakers in a morning appearance to “rise to the occasion” — and quickly.
In a sign of progress, House Republicans dispatched their second-ranking leader, Rep. Roy Blunt of Missouri, to join the talks after their objections to an emerging compromise had brought negotiations to a standstill the day before. They demanded “serious consideration” for their plan.
“We want to see a deal happen — there’s no doubt about it,” said Rep. Eric Cantor, R-Va.
The legislation the administration is promoting would allow the government to buy bad mortgages and other sour assets held by investors, most of them financial companies. That should make those companies more inclined to lend and lift a major weight off the national economy that is already sputtering.
But a significant number of lawmakers, including many House conservatives, say they’re against such heavy federal intervention. Under the GOP plan, the government would insure the distressed securities rather than buy them. Tax breaks would provide additional incentives to invest.
The crisis was hardly limited to the U.S. Bush held a lengthy Oval Office meeting with British Prime Minister Gordon Brown that focused on how the problems were spreading, then said, “I told him the plan is big enough to make a difference, and I believe it will be passed.”
There were fresh signs of urgency at both the White House and the Capitol, one day after the rancorous White House session and the collapse of Seattle-based Washington Mutual, the largest failure in U.S. banking history. The institution had invested heavily in the now-moribund mortgage market.
In days of negotiations, the administration has accepted demands from lawmakers to give Congress considerable authority to oversee the bailout and require that the government try to renegotiate the bad mortgages it acquires so more borrowers could keep their homes. Paulson also relented to requests to limit the severance packages that corporate executives can receive from firms benefiting from the government bailout.
In addition, rather than provide $700 billion up front, as Paulson initially requested, Congress would approve the funds in stages. Under one approach, $250 billion would be made available at once, with the president able to certify the need for an additional $100 billion on his own authority. The final $350 billion would become available with a second presidential certification, although this time Congress would have authority to block it.
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