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Lawmakers Reach Tentative Bailout Deal   

2008-09-28 15:14:54|  分类: 次贷危机 |  标签: |举报 |字号 订阅

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Lawmakers Reach Tentative Bailout Deal

Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.

[Lawmakers reach tentative bailout deal] Associated Press

House Speaker Nancy Pelosi, Treasury Secretary Henry Paulson, right, Senate Majority Leader Harry Reid, second left, and Sen. Judd Gregg, left, announce a tentative deal on legislation regarding the financial crisis just after midnight Sunday.

Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi (D., Calif.), and Senate Majority Leader Harry Reid (D.), were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after hours of exhausting negotiations.

"I think we're there," an exhausted Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank (D., Mass.) and Senate Banking Committee head Christopher Dodd (D., Conn.)

Those present said the bailout plan still needs to be drafted in its final form, but a formal announcement should come some time Sunday. The plan is likely to include limits on executive compensation for some firms, as well as give the government some authority to take equity stakes in firms that sell soured assets to the U.S. government.

"We worked out everything," said Sen. Judd Gregg, the chief Senate Republican in the talks. He said the House should be able to vote on it Sunday, and the Senate could take it up Monday.

President George W. Bush spoke with Ms. Pelosi earlier in the evening about the discussions, and the White House welcomed news of the deal. "We're very pleased with the progress tonight and appreciate the extraordinary bipartisan efforts being made to stabilize our financial markets and protect our economy," White House spokesman Tony Fratto said.

The next step will involve selling the deal to rank-and-file lawmakers, who have been unhappy over signing on to a giant bailout package just weeks before the November elections. House Minority Whip Roy Blunt (R., Mo.) said that he planned to talk to colleagues and get reactions.

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

Lawmakers had entered a new round of meetings shortly after 7:30 p.m. EDT Saturday, with pizzas headed to one office and a platter from sandwich shop Cosi being delivered into the House Speaker's office. By roughly 11:30 p.m., what Sen. Reid described as a "breakthrough" came in the form of an idea from Ms. Pelosi that was enough to advance talks.

She found middle ground with other negotiators on provisions aimed at allowing the federal government to recoup money for taxpayers if the asset-purchase program isn't making money after a certain amount of time. A House leadership aide said early Sunday morning that details were not immediately available because the staff was still finalizing language, but that the general concept was to provide Congress with a mechanism that would be triggered at some point in time -- likely within five years -- that would allow lawmakers to offset some, if not all, of the bailout costs.

One idea that has been floated by both conservative House Democrats and Senate Democrats has been to create a deposit insurance fund similar to the one operated by the Federal Deposit Insurance Corp. for bank accounts. A Senate aide said they were pushing provisions that would address such concerns, mainly by assessing fees on a wide swath of financial institutions over a certain asset size to create a privately-funded rescue fund to pay for any future and current bailouts.

Offers and counteroffers were flowing back and forth all night. Among the offers extended by Democrats: an agreement to drop a proposal to devote 20% of potential profits to an affordable housing fund, according to a Senate staffer close to the talks.

One of the biggest sticking points involved concerns that executives at troubled financial institutions would wind up benefiting from handsome pay packages as the government took on more risks. But Democrats emerging from the talks said a whole array of issues related to executive pay had been addressed, including issues involving "golden parachutes," the big pay packages that are sometimes awarded to departing executives.

Sen. Dodd, Senate Banking Committee Chairman, said that protections against golden-parachute awards had made it into the final deal, along with an insurance component sought by House Republicans as an option for the Treasury to use if necessary and requirements that Treasury is seeking to mitigate and reduce foreclosures where possible.

Some lawmakers had set a deadline of reaching a deal by the time the Asian markets open Monday morning. In a sign of how sensitive Congress is to market reaction, lawmakers stayed in touch with outside experts during the negotiations, including talking to billionaire investor Warren Buffett.

[Sen. Charles Schumer, left, Sen. Max Baucus and Sen. Jack Reed take a short break during ongoing negotiations on Capitol Hill on Saturday.] Associated Press

Sen. Charles Schumer, left, Sen. Max Baucus and Sen. Jack Reed take a short break during ongoing negotiations on Capitol Hill Saturday.

The bailout negotiations took a step forward Friday, when Senate Democrats agreed to include an insurance-based scheme as an option as part of the Wall Street bailout package in a bid to win support of House Republicans, who have been the main obstacle to reaching an agreement.

Sen. Charles Schumer (D., N.Y.) said that while Democrats would allow the insurance idea to be included, he didn't think that any financial firms would choose to take part in such a scheme. "I offered on behalf of Sens. (Christopher) Dodd and Reid that we would put their proposal in as an option," said Mr. Schumer. "No one would have to use it, but it would be there as an option."

Initially there were to be four lawmakers -- one representing each party in both houses of Congress at the talks. They were Messrs. Gregg and Dodd in the Senate and Reps. Barney Frank (D., Mass.) and Blunt in the House. Mr. Frank is the chairman of the House Financial Services Committee, Mr. Blunt is the Minority Whip, while Mr. Dodd is the chairman of the Senate Banking Committee hearing, and Mr. Gregg is the ranking member on the Senate budget panel. But they were joined by several other senior Democrats, and there are as of late Saturday nine Democrats in the room compared with just the two Congressional Republicans, and Paulson.

After an apparent agreement was announced by lawmakers Thursday, House Republicans threw a wrench into the process by saying they would not support the deal, proposing instead their own alternative plan. That plan would be based around the idea of an industry-funded insurance pool to provide certainty to the markets, rather than a taxpayer-funded scheme.

[Bailout]
—Corey Boles and Sarah Lueck contributed to this article.

Write to Michael R. Crittenden at michael.crittenden@dowjones.com and Siobhan Hughes at siobhan.hughes@dowjones.com

An Inside View of a Stormy White House Summit

WASHINGTON -- Midway through the White House summit on Thursday featuring America's top political leaders, Republican presidential candidate Sen. John McCain was asked for his opinion about the administration's proposed $700 billion financial rescue package. He deferred to the top House Republican, who bluntly laid out a litany of complaints.

[Inside the White House Summit] Getty Images

President Bush makes remarks on the economic crisis during a meeting with presidential candidates McCain and Obama and members of Congress.

The sudden objections caused agitation among Democrats present, who thought they had the makings of a deal. The group turned to Sen. McCain to ask if he endorsed his party's qualms, but he dodged the question, saying only that the concerns had to be addressed, according to people familiar with the meeting. He wasn't specific about the legislation itself.

Then, all hell broke loose. "I just sat there and let them scream," Sen. McCain later told an adviser.

That afternoon, the theatrics of the presidential campaign collided with days of tense negotiations over the controversial bailout package designed to forestall the collapse of U.S. financial markets. At the center of the drama was Sen. McCain.

On Thursday morning, Democrats and some Republicans hammered out a tentative compromise. Then, Sen. McCain arrived in Washington, just before noon and under Secret Service escort. He met with House Republicans and listened to their complaints. He met with Senate Republicans and chided them for assenting to a deal without his input. At 4 p.m., he headed over to the White House.

Democrats say the senator blew up the delicately poised talks in order to curry favor with his conservative base and ultimately to take credit for a deal many assume will still come together.

Sen. McCain's camp says there was never a deal to begin with, and he was only trying to improve the legislation to better protect taxpayers. House Republicans see Sen. McCain's arrival as the point that revitalized their rear-guard action. Arizona Republican Jeff Flake says Sen. McCain sent the message that Republicans want to do more for taxpayers. "For him to come and say that coincides with our message completely," said Mr. Flake.

Whichever side is right, the day's drama represented a remarkable public display of dissension in a town used to high drama. On Friday, the White House and Congress redoubled efforts to forge legislation that would confront the financial crisis, with House Republicans showing a new willingness to engage.

This account is based on a series of interviews with congressional officials, campaign aides and others.

On Wednesday, Sen. McCain declared that the bailout package proposed by the Bush administration was in trouble and needed bipartisan support from the two presidential contenders. That prompted an invitation to Sen. McCain and Sen. Barack Obama from the president to meet at the White House.

On Thursday morning, Democrats and others hashed out the outlines of a plan that endorsed the core of the administration's desire for a $700 billion fund, but added conditions, such as help for homeowners, pay curbs for executives and the government taking equity positions in participating companies. Some Republicans voiced their support.

After arriving in Washington, Sen. McCain immersed himself in two hours of meetings, making a show of involving himself in the shaping of the bill.

In a private meeting on Capitol Hill, a group of House Republicans, with the blessing of Minority Leader John Boehner (R., Ohio), urged Sen. McCain to consider a more market-based alternative to the Bush-backed plan.

The plan was developed by a cross-section of House Republicans, including Rep. Eric Cantor of Virginia, and involved a complex use of government insurance to bolster the toxic assets at the heart of the financial crisis. Mr. Cantor said the goal was to come up with something that House Republicans could support.

One Republican said Sen. McCain thought the plan was a "decent idea," but stopped short of endorsing it.

Later, Sen. McCain sat in on a lunch with Senate Republicans. Present were three senators who had supported the emerging compromise: Sens. Judd Gregg, Robert Bennett and Bob Corker. Mr. McCain, standing and sitting at various points, weighed in, according to people familiar with the meeting. He was upset his colleagues had supported the plan, which appeared likely to become law, without his input.

According to Sen. Jon Kyl, Sen. McCain told fellow Republicans to hold off making a deal. "We have got to see the details in this thing, in writing," Sen. McCain was quoted as saying.

A McCain adviser disputed the account, saying that Sen. McCain never grew upset and was not critical of his colleagues.

Even before the White House meeting started, tensions were running high. Democratic House Speaker Nancy Pelosi was still at the Capitol when she got a call from Treasury Secretary Henry Paulson, who informed her of the brewing revolt among House Republicans.

The attendees -- Sen. McCain, Sen. Obama, the president, the Treasury secretary and congressional leaders -- gathered in the Roosevelt Room, a formal meeting room off the Oval Office decorated with portraits of both Democrat Franklin Roosevelt and Republican Theodore Roosevelt.

The president and Mr. Paulson made opening comments, with Mr. Paulson reminding attendees of the gravity of the state of financial markets. Mr. Bush turned to Ms. Pelosi, who announced that the Democrats were going to allow Sen. Obama to lead off for them. The Democratic nominee spoke for a few minutes, going over his four well-known principles for what he would consider to be crucial to the legislation.

Then Mr. Bush turned to Sen. McCain and asked if he wanted to follow. Mr. McCain said, "Actually, the longer I'm here, the more I respect seniority." He said he would defer to the Republican congressional leaders who were present.

Mr. Boehner, the House minority leader, outlined his concerns about taxpayer protections in the legislation and then talked instead about the insurance-based alternative. At several points, the conversation became raucous, with members loudly talking over one another.

In a television interview, Sen. Obama recalled asking: "Well, do we need to start from scratch, or are there ways to incorporate some of those concerns?"

Sen. McCain didn't answer directly. Instead, he outlined the five principles that he wanted to guide the legislation.

Spencer Bachus, an Alabama Republican House member who initially supported the talks, recalled the meeting boiling over. "Then I started detailing what we wanted in the bill, and that's when Speaker Pelosi started yelling at me," he recalled.

Mr. Bush allowed everyone to vent their frustrations. Finally, he pointed out that both sides still agreed on the need to get the bill done. He added that "if we don't loosen up some money into the system, this sucker could go down," a repeat of the warning in his prime-time speech on Wednesday night that a financial panic is a real risk.

According to White House spokeswoman Dana Perino, the president then said: "At the end of this debate, I'm going to turn to the Treasury secretary and ask him and Ben Bernanke, 'Does this legislation do what needs to be done to save the economy?' "

As the leaders were preparing to leave, a horde of at least 75 reporters and camera people waited outside under the West Wing portico. Mr. Bush said that if the attendees were going to make statements, he preferred that they go together and say that "we're all working to get it done."

After the clashes, they decided not to talk to the waiting reporters at all -- except for Sen. Richard Shelby, an Alabama Republican, a vocal critic of the rescue plan.

—Sarah Lueck, Jess Bravin and Elizabeth Holmes contributed to this article.

Write to John D. McKinnon at john.mckinnon@wsj.com, Laura Meckler at laura.meckler@wsj.com and Christopher Cooper at christopher.cooper@wsj.com

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