Bush Team, Congress Negotiate $700B Bailout

The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.

"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing specifics, he said, "This is a big package because it was a big problem."

Lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money.

The government must bail out the financial system "because if we don't, it will have a tremendous impact on American consumers, homeowners, taxpayers and the rest," House Speaker Nancy Pelosi, D-Calif., said in San Francisco.

But, she added, "We cannot deal with this unless this bailout helps families stay in their homes."

Senate Majority Leader Harry Reid, D-Nev. said "we cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real, and the consequences of inaction could be catastrophic. Every single American has a stake in preventing a global financial meltdown."

The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.

"The American people are furious that we're in this situation, and so am I," the House's top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."

Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."

Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."

He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."

Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress.

Democratic rival Barack Obama used the party's weekly radio address to call for help for Main Street as well as Wall Street.

"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."

Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.

Besides mortgage help and executive compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility.

Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. "I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better," he said about legislation being drafted.

Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive compensation limits and new foreclosure-prevention measures. Details of those changes were not available Saturday, as staff aides worked to draft them. Bush and Treasury Secretary Henry Paulson conferred by phone for about 20 minutes in the afternoon, gauging how the negotiations were unfolding.

Among the key issues up for negotiation is which financial institutions would be eligible for the help. The proposed legislation doesn't make it clear, leaving open the question of whether hedge funds or pension funds could qualify.

The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail. The bailout would be sheltered from court review.

The government could contract with private companies to manage the assets it purchased under the rescue.

Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept.

If enacted, the plan would give the treasury secretary broad power to buy, manage and sell the mortgage-related investments without any additional involvement by lawmakers. It would, however, require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.

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  • by Little Lady on Sep 21, 2008 at 03:43 PM
    You republicans sure are wasting a lot of you life trying to convert some of us Americans into your way of thinking. You have been making some of US out to be a flock of sheep maybe we seem that way to you but don't count on it.None of US will ever join a heard herd of Jack A***S to help destroy our values.
  • by Tank on Sep 21, 2008 at 12:20 PM
    I am sick of some of you people talking down to other people by making demented statements like most voters do not understand politics, I think you need to speak for your self. Stop looking down your nose at other people. Do you know that is what is driving people away from the republican party. Even if I though you were right I do not want to be associated with you type. It would be like being associated with Hitler or Charles Manson or some other low life on this earth. It is a birds of a feather sort of thing.
  • by David Location: Manteo on Sep 21, 2008 at 11:33 AM
    Why doesnt Bush just sit down and shut up and stop acting as though he suddenly cares about what is happening in this country? He is so worthless!! They announced it over the news that Bush was having up-teen million dollars specially printed to help get some of these companies out of debt.. Then why cant he print up that money and help get some of the American families out of debt? Why doesnt he go to that big bank vault that our government owns over seas and take a few pallets of that money and use it to help these families on American Soil for once in his natural born worthless life? You know why he doesnt do it? Because Bush doesnt care about us! He only cares about his Iraqian loved ones and himself!!
  • by WOLFGANG Location: CHOCOWINITY on Sep 21, 2008 at 11:09 AM
    Stock Market up 700 points since Thursday. I can not wait for the opening bell on Monday to Trade more stocks. It is real nice to make MONEY again. I hope all you Investors and Traders make $$$$$ this week!!!
  • by American Biker Location: Eastern NC on Sep 21, 2008 at 10:08 AM
    Well, let's see. My wife and I got a $1200.00 Stimulus package, which we had to spend on credit card debt, caused mainly by corporate Americas greed ( We don't use the card frivously or for luxuries) Yet the government wants to use our tax dollars to bail out Financial institutions that I had not heard were in trouible until one went bankrupt, and then ALL of themjumped on the bandwagon. Why aren't these companies liable for there own indiscretions ( I'm sure that's what got them there in the 1st place ). After the bail out, I'm also pretty sure that alot of the same ceo's, etc will still have there jobs. I love my country, veterans, constition ( or whats left of it ), but I hate my Government. I wish just one olitician could change my mind,but even the slanders and name callings among NC's office runners leave me feeling left out in the cold. God, have mercy on the average working citizen PLEASE !!!!!!!
  • by Devil Dog Location: New Bern on Sep 21, 2008 at 09:45 AM
    To LT...This economic crisis is global;therefore Russia, China and the EU must be part of the overall solution. If we,as a Super Power, don't provide assistance to vulnerable countries, they will be overtaken by our enemies. Take notice that Russia is assisting Cuba, Venezuela,North Korea and Iran? As my Polish mother always said " Don't ever trust a Russian". How prophetic.We must hold individuals to account, and severely punish those responsible. Unfortunately, most of our Legislatures, in both State and Federal Government, are covering themselves and their investments at our expense. Maybe it is time for TERM LIMITS, because most voters do not understand politics and the corruption that continually goes on. I want a President who is going to expose these idiots!!
  • by LT on Sep 21, 2008 at 09:24 AM
    Why are we the ones bailing everyone else out? We shouldn't be held responsible for others greed and bad decisions! Stop wasting money on foreign aid and fix this country first!
  • by Devil Dog Location: New Bern on Sep 21, 2008 at 07:59 AM
    Let's fix blame on Alan GREENSPAN(Fed Chairman),who convinced CLINTON,to repeal the GLASS-SEGAL Act of 1933. In addition, he kept lowering interest rates,so anyone who could breathe could qualified for a loan. After that go to each indiviual,the lending institutions, lobbyists, Congress etc. etc. You won't hear GREENSPAN'S name because his wife works for a LIBERAL news network. Her name is Andrea Mitchell. The beat goes on and on and on. WAKE UP AMERICA!!!
  • by hope Location: NC on Sep 21, 2008 at 07:59 AM
    Is this another band-aid on the hemorrhage that is occurring? The people responsible for this need to be behind bars!! Those politicians that turned a blind eye toward it should be right in there with them. This is a very slippery slope.
  • by Devil Dog Location: New Bern on Sep 21, 2008 at 05:24 AM
    Here is a laconic analysis..POLITICS means POLI-Many TICS..Blood Suckers. It's just that simple.
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