Bailout bill day of reckoning
Treasury’s $700 billion rescue plan for the financial markets goes to the House floor Monday, backed by the two major presidential candidates but facing resistance still on the right and left.
Coming just weeks before the November elections, the 110-page bill is a major test of whether the political center can hold behind what’s become an unprecedented government intervention to try to break the credit crunch threatening the larger U.S. economy.
With the dollar up on foreign markets late Sunday, so were hopes for the bill’s passage. But by any measure, this will be a “no-heading back, go-for-broke” vote—capping a wild 10 days for both lawmakers and Treasury.
“If we don’t pass it, we shouldn’t be in Congress,” snapped Sen. Judd Gregg (R-N.H.), the lead negotiator for Senate Republicans.
But his fellow New Englander, Rep. Christopher Shays (R-Conn.) warned the depth of unhappiness among members is real. “For this to pass, a lot of people are going to have to change their minds,” Shays said.
House Republicans are at the center of the storm, with conservatives in open rebellion. But Democrats have their own defections, and within hours of the agreement, the leadership was already highlighting the bill’s promise to crack down on Wall Street pay, mitigate foreclosures and even allow Congress to cut off funding at $350 billion.
“People have to know this isn't about a bailout of Wall Street; it's a buy-in, so that we can turn our economy around," said Speaker Nancy Pelosi. But from the moment the California Democrat brought down the gavel Sunday, a parade of conservatives and liberals were on their feet bashing the deal—and Wall Street, as a haven for frauds and criminals.
Republican John McCain and Democrat Barack Obama, the two presidential candidates, can vote Wednesday, when the measure is expected to come up in the Senate.
But the real test of their influence will come Monday in the House, and both men warned Sunday that failing to act was no longer an option.
“The breakthrough between Congress and the administration is 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. “But regardless of how we got here, a failure to deal with the current crisis would have devastating consequences for our economy, costing millions of Americans their jobs and retirement security.”
McCain, appearing later on ABC News’ “This Week,” said, “This is something that all of us will swallow hard and go forward with.”
In a seven-page letter released on the eve of Monday’s House vote, the Congressional Budget Office predicted that Treasury will use all of the $700 billion in purchase authority within the two years allowed.
But the net budget impact and cash disbursements will be “substantially less” since the mortgage-related assets will eventually be sold, CBO said, and “thus generate income that would offset much of the initial expenditures.”
That analysis helps bring along Republicans. Yet a closed-door party meeting Sunday night illustrated all the problems anew. The session ran for hours, and while Minority Leader John Boehner (R-Ohio) said he would vote for the bill, he could not predict the number of votes he would have for it, and he famously referred to the measure as a “crap sandwich” before his rank and file.
Then again, in what could be a telltale sign of Republicans pulling together, Wisconsin Rep. Paul Ryan, the ranking Republican on the House Budget Committee, said he would now vote for the bill.
But in truth, Democrats and Republicans alike seem to moving toward the vote without a clear understanding yet of where the votes will be when debate begins early Monday.
Business lobbies have stepped in to provide some muscle.
“Main Street and Wall Street are inextricably linked,” wrote the U.S. Chamber of Commerce in a vote alert Sunday, urging passage and warning it may count the House vote in its annual scorecard. “This proposal addresses the needs of both and will not only begin the process of righting the financial markets, but help to return the economy to robust growth, which will create jobs across America.”
Treasury Secretary Henry Paulson promised that “quick, effective and bipartisan action” would send a “signal to investors large and small, here and abroad, that we are committed to taking the necessary actions to protect our financial system and our economy. The American people will recognize the leadership you have all shown to protect them – to preserve their access to credit, and preserve jobs.”
But in announcing the deal, House Financial Services Committee Chairman Barney Frank (D-Mass.) quipped that no solution to a problem could be “more elegant” than the problem itself. And all agree the huge credit crisis facing the American economy is brutal in its scope.
The massive intervention, like the crisis itself then, takes everyone into uncharted waters. And in crafting the bill, lawmakers found themselves scared by what they were asked to do, even as they were trying to calm frightened markets.
“There is some tension between the needs of the members and the needs of the markets,” Frank said of his partnership with Paulson “He thinks neurosis on the part of the markets deserves more credibility than neurosis on the part of elected officials and getting a bill passed.”
The bill itself reflects this tension:
• The full $700 billion is authorized, but the money will be parsed out in a series of installments that give Paulson a relatively free hand in accessing the first $350 billion. A first installment of $250 billion is immediately available, and a second of $100 billion would follow as needed.
The White House must notify Congress when Treasury wants the second half, and lawmakers would then have 15 days in which to cut off funds. But this must be done in the form of a joint resolution, subject to a veto by the president and therefore requiring a two-thirds majority in both houses to be effective.
Treasury estimates that the program can’t be put in place for several weeks, but Paulson managed to avoid earlier efforts to say the second $350 billion couldn’t be released until 90 days after the bill’s enactment.
• Paulson’s free hand on spending is matched by substantially greater oversight of the program than Treasury first envisioned, as well as demands for greater transparency, including the posting of transactions on line with two days. Apart from a new five member oversight board appointed by the bipartisan leadership in Congress, the GAO will have a presence in Treasury, and an independent inspector general will monitor the secretary’s decisions.
• Lawmakers won the promise of new restrictions on executive pay and severance packages for Wall Street executives whose companies are helped by the rescue plan. And the bill reflects a more aggressive approach toward Treasury also claiming an equity interest — on behalf of taxpayers — through warrants giving the government options for non-voting stock shares that could turn a profit once the economy improves.
The precise language of the executive pay provision was one of the most hotly contested issues, and the final deal rests on Paulson being more aggressive than he first wanted, but also on lawmakers’ giving him some discretion so that these reforms don’t cripple his ability to draw a wide selection of companies into the program.
The bill takes a hybrid approach, and in the case of assets bought at auction, the most severe tax penalties kick in only when Treasury has bought more than $300 million in assets. At that juncture, the company would lose its deduction for salaries above $500,000 for its top executives. A second “golden parachute” provision threatens companies with a 20% surtax on such rich benefits.
• There is a joint commitment by Democrats and Paulson to use the government’s increased leverage in the mortgage market to help homeowners facing foreclosure. Democrats stepped back from their demands for a change in law allowing bankruptcy judges to restructure residential mortgage payments, but the bill extends a popular tax provision to protect individuals from tax liability on their foreclosures.
• On two key points, final compromises were required for competing priorities between House Democrats and Republicans. In the first case, Democrats failed to win their proposal that Treasury be required to impose a fee on Wall Street transactions in the future to help cover the cost of any government losses as a result of the rescue plan. Instead the final compromise calls for the next president to make an assessment of any losses after five years and then send a proposal to Congress to raise money from the “financial industry” to recoup these funds.
The second compromise dealt with a Republican proposal that the government intervene in the markets, not by buying up bad assets but by providing a federally backed insurance program that might make the same mortgage-related securities more salable. The compromise reached would require Paulson to “establish” such an insurance alternative if he goes ahead with his plan, but he is not compelled to use the insurance option.
• Early Republican demands for added tax cuts were not successful, but the bill includes an estimated $3 billion tax provision to help small community banks take a deduction for losses from their investments in the two mortgage giants, Fannie Mae and Freddie Mac, since taken over the government this summer.
Racing to reach a deal before the markets open Monday, lawmakers met late into the night Saturday n Pelosi’s Capitol office. Paulson set up a sort of command center in Boehner’s office, with legislators and staffers criss-crossing Statuary Hall as they shuttled back and forth.
"This is Saturday night,” said Senate Budget Committee Chairman Kent Conrad (D-N.D.) “You have the secretary of Treasury. You have congressional leaders. You have committee chairmen of all the committees of jurisdiction. And we are here. There’s a reason we’re here — because there’s a great feeling of responsibility to get a package as quickly as we can while doing it as well as we can."
...................
Bailout bill day of reckoning
By DAVID ROGERS | 9/29/08 12:07 AM EDT
Updated: 9/29/08 12:07 AM EDT
|
| 216 : vote(s) so far
| Cast your vote: