Lawmakers Agree on Outline of Bailout
The NEW YORK TIMES Published: September 25, 2008
WASHINGTON — House and Senate negotiators from both parties said Thursday that they had reached general agreement to move forward with the administration’s proposed $700 billion bailout of the financial system, authorizing unprecedented government intervention to prevent what President Bush warned could be a widespread economic collapse.
Emerging from a nearly three-hour meeting in the Capitol, Republicans and Democrats said the legislation would include limits on the pay packages for executives of firms that seek assistance and a mechanism for the government to take an equity stake in some firms, so taxpayers have a chance to profit if the bailout plan works.
The announcement that lawmakers had reached an accord came on a day of political theater at the Capitol and at the White House where President Bush met with Congressional leaders and the presidential candidates, Senator John McCain, Republican of Arizona, and Senator Barack Obama, Democrat of Illinois.
“We’re in a serious economic crisis,” Mr. Bush told reporters as the meeting began, shortly before 4 p.m. in the Cabinet Room of the White House. “This meeting is an attempt to move the process forward. My hope is we can reach an agreement very shortly.”
Mr. McCain was seated at one end of a long conference table, Mr. Obama at the other, with the president and congressional leaders between them. Neither spoke, though Mr. McCain smiled broadly as reporters shouted questions that went unanswered by President Bush.
Some Republicans, ahead of the White House meeting scrambled to suggest that talk of an agreement was premature.
But lawmakers who participated in the detailed talks said that few substantive differences and no major obstacles remained.
“I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president, and bring a sense of certainty to this crisis that is still roiling in the markets,” said Robert Bennett, Republican of Utah. “That is our primary responsibility, and I think we are now prepared to meet it.”
Mr. Bennett, one of the senior members of the banking committee, made a point of describing the meeting as free of political “posturing.”
“I appreciate very much my Republican colleagues who participated in the meeting and added tremendously,” he said. “We focused on solving the problem, rather than posturing politically and it was one of the most productive sessions in that regard that I have participated in since I have been in the Senate.”
The bill would authorize the full $700 billion requested by President Bush, lawmaker said, but that Congress was intent on disbursing the money in installments.
One plan under consideration would release $250 billion immediately, with another $100 billion available at the discretion of the president.
They also said that there would be limits on pay packages for executives whose firms seek assistance from the government and a mechanism for the government to be given an equity stake in some firms so that taxpayers have a chance to profit if the companies prosper in the months and years ahead.
On Wall Street, shares, which had opened higher, rose sharply on expectations of a rescue plan. The Dow Jones industrial average closed up 196 points.
The meeting on Thursday morning, in an ornate conference room on the first floor of the Capitol, was convened by Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, and Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee.
“We are giving the secretary authority that he will need in order to act and the funding that he will need,” Mr. Dodd said after the meeting, referring to the Treasury secretary, Henry M. Paulson Jr. “We also have dealt, I think effectively, with the issue of effective oversight, with homeownership preservation as well as with executive compensation.”
“We now need to meet with the Treasury Department,” Mr. Dodd said, “and go over these principles which we have agreed on amongst ourselves and obviously go back to our respective caucuses and talk to them as well.”
The news from Congressional leaders that they were in the final stages of reaching a deal stole some of the drama from the meeting scheduled at the White House in the afternoon.
Some Democrats, who had complained on Wednesday that Mr. McCain was pulling a stunt by saying he was suspending his campaign and returning to Washington, said the White House visit was a distraction. But lawmakers agreed that Mr. Bush and the candidates could help build support for the bill.
In a brief speech on the Senate floor, the majority leader, Harry Reid of Nevada, said that in the next few days, he expected to cast the first procedural votes on the bailout plan, in which the government plans to buy distressed debt from financial firms and stave off what President Bush warned could be a widespread economic collapse.
Mr. Bush in a prime-time televised speech on Wednesday night appealed to the nation — and to reluctant lawmakers — to support the plan. And he asked Mr. McCain and Mr. Obama to meet him and Congressional leaders in a show of cooperation.
After the overnight drafting efforts on both sides of Capitol Hill — with pizza on the House side, and Thai food in the Senate — Democratic officials said they had completed a unified draft of a bill. (Negotiations between the House and the Senate can be nearly as complicated as negotiations between Democrats and Republicans.)
But even as Congressional leaders, including Representative Spencer Bachus of Alabama, the senior Republican on the Financial Services Committee, said they had settled on the framework of an agreement, other House Republicans said there was ongoing opposition to the rescue package.
Conservative Republicans, in particular, have said that such a huge government intervention violated their free-market principles.
A group of Republicans, led by Representative Eric Cantor, a Republican leader in the House, were circulating an alternative plan that would rely on mortgage insurance, provided by the government, rather than taxpayer purchase of frozen mortgage assets.
A senior Republican lawmaker, speaking on condition of anonymity so as not to undermine the party leadership, said there was a “violent reaction” among House Republicans to the Paulson plan. He said backers of the alternative, one of several that have been proposed, believe that they can force negotiators to accept it as part of a larger deal.
House Speaker Nancy Pelosi of California had made clear that she did not want to approve the bailout plan without rank-and-file Republican support.
Sheryl Gay Stolberg contributed reporting