House Financial Services Committee said Friday he is “convinced” now that agreement can be reached by Sunday on Treasury’s Wall Street rescue plan, but substantial Republican support will be needed if the bill is to get through the House.
“There’s no short cut here,” said Rep. Barney Frank (D-Mass.). “The House Republicans are going to have to be supportive of this bill or we won’t get a bill.”
House Minority Whip Roy Blunt— tapped Friday to represent his party in the talks—told Politico that he was going into the discussions “really trying to negotiate something that a lot of Republicans can be for.”
Much to the discomfort of Democrats—and some in the administration—Sen. John McCain, the Republican presidential nominee, will also be back in Washington determined to reassert himself in the process even after a blow- up at the White House Thursday night.
“He said, `I want to see this done and I wish you best of luck in getting it done,” said New Hampshire Sen. Judd Gregg, the lead negotiator for Senate Republicans, after conferring with McCain Friday. Staff talks continued into Friday night in anticipation of isolating the final issues for the principal negotiators like Frank and Gregg to resolve Saturday and Sunday. And there appears to be a greater willingness to expand the options available to Treasury Secy. Henry Paulson—-and his successor in the next administration, be it McCain’s or his Democratic rival, Barack Obama.
Frank welcomed Blunt’s participation and renewed the Democrats’ offer to include some Republican ideas as an “option” for Paulson. But the chairman warned that the core Paulson plan must remain intact.
“Unless they give in in their opposition to the central Paulson plan, I don’t see a bill,” Frank said.
Frank and Blunt spoke out even as Washington sorted through the wreckage left by a wild Thursday. A White House meeting, urged by McCain and including his Democratic rival, Sen. Barack Obama, as well as House and Senate leaders ended on a sought note afte often angry, animated exchanges, provoked by the $700 buillion rescue plan.
Blunt’s appointment ends a short-lived Republican boycott of the talks that followed. But the path ahead remains very steep, and House conservatives are pressing for additional tax breaks as well as the elimination of small but symbolic provisions that would dedicate any profits from the assets to help an affordable housing program.
It has been a week now since Paulson first proposed the massive government intervention which seeks to buy, hold, and sell mortgage related assets that have increasingly dragged down the markets since the collapse of the U.S. housing bubble.
Apart from injecting new capital, Paulson and Federal Reserve Chairman Ben Bernanke hope the initiative will help break the downward cycle of “fire sale” prices that have discouraged private investment. Through various auction mechanisms, the government purchases could shed new light on the assets’ true value, and thereby remove some the uncertainty that has discouraged lending.
Democrats have proposed that the $700 billion be parsed out in increments, beginning first with $250 billion and then $100 billion. The second $350 billion would also become available in time, but a future Congress could attempt to block its release by enacting a joint resolution—requiring the signature as well of the next president.
Even under these terms— which Treasury fears are too restrictive— House Republicans say the potential losses for the taxpayer are excessive. Rather than purchase bad assets, one alternative would be to extend government-backed insurance for the securities with industry paying a fee for the added coverage that could improve their value.
Speaking with reporters Friday, Frank renewed an offer earlier this week by Speaker Nancy Pelosi (D-Cal) that this insurance proposal could be added as an option for Paulson or any future Treasury secretary. The chairman said he had discussed the matter with Paulson, who was amenable as well.
“Frankly, he said, ‘If that was added as an option, it wouldn’t hurt, but I couldn’t use it,’” the chairman said of his discussion with Paulson. As for Frank himself? “I wouldn’t mind, but it doesn’t do anything. It’s useless but not harmful,” Frank said. “The problem was in displacing the other stuff.”
Blunt said Republicans want “meaningful” changes to the Paulson plan, not “some type of window dressing to say it’s there.” But a top McCain adviser to said adding the insurance language—even as just an option— would be helpful, since even if Paulson were to reject the idea, the authority would still be available for a new president and secretary next year.
“Yes it would be helpful and other options like loans would be helpful too,” said Mark Salter, a longtime aide to the Arizona Republican. “The next president will have the options even if Paulson chooses not to use them.”
McCain met again with House Minority Leader John Boehner (R-Ohio) in the Capitol Friday before leaving for the presidential debate in Mississippi. And his campaign issued a statement that “he will return to Washington to ensure that all voices and interests are represented in the final agreement, especially those of taxpayers and homeowners.”
All “voices” in this case would certainly include the House Republicans, who have been much more vocal in their opposition than their Senate counterparts. McCain’s staff say he wants to be constructive, helping to build the support needed for a bipartisan package. But Democrats are leery and even fear that McCain is setting up a situation where he and House Republicans run against the rescue plan and try to tab Obama with the huge costs.
House Democrats remember the price they paid politically for a vote in 1993 on then-President Clinton’s deficit reduction plan—including tax increases. And the shadow of that experience hangs over cloakroom discussions between Democratic lawmakers today.
“It feels like ‘93…I think people feel very strongly about that,” said Rep. Alcee Hastings (D-Fla.). “And I also think people feel very strongly that Republicans, because of deregulation and other matters, contributed to the problem and they should be the ones wanting the correction.”
Boehner, who won a standing ovation in his conference Friday, has said Congress must act in response to Paulson’s request. But he sent a letter to Pelosi urging her and Democrats to give more consideration to changes proposed by his conference.
“If such consideration is not given, a large majority of Republicans cannot and will not – support Secretary Paulson’s plan,” Boehner wrote.
At the White House, the House Republican leader had bluntly warned: “I can’t invent votes,” for the package. But Frank angrily accused the minority of trying to undercut Paulson by crafting a late-breaking alternative proposal—with the tacit support of McCain. McCain’s campaign would deny this later, but the meeting degenerated into animated, often angry exchanges as a beleaguered President Bush had to struggle to maintain order and reassert himself.
Democrats have already promised a greater emphasis on efforts not just to relieve Wall Street firms of their bad debts but also to help homeowners threatened by foreclosure. Companies that benefit from the plan would be expected to limit pay and severance packages for their executives, and community banks are expected to benefit from a new $3 billion tax break as a result of their stock losses in the government takeover of the two mortgage finance giants, Fannie Mae and Freddie Mac.
Gregg, who has close ties to the White House and a history of past friction with McCain, conceded that portions of the package wouldn’t be to Treasury’s liking, but the agreement was a step forward.
Sen. Judd Gregg (R-N.H.), who has become the lead negotiators for Senate Republicans and has close ties to the White House, conceded that portions of the package wouldn’t be to Treasury’s liking, but the agreement was a step forward.
“There are things they won’t be comfortable with — obviously there was a lot of give on both sides,” Gregg said. “I think they may be very concerned about some sections of it, but the overall thrust of it will be to give them the authority they need to address the underlying problem, which is to get these securities out of the blocking pattern that they are in, relevant to the credit markets. This will allow the Treasury secretary to go and clean up the credit markets using basically tax dollars.”
Frank said that Paulson recognized the need to compromise but “there is some tension between the needs of the members and the needs of the markets,” the chairman smiled.
“He thinks neurosis on the part of the markets deserves more credibility than neurosis on the part of elected officials [about] getting a bill passed.,” Frank said.
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Frank: Deal can be reached by Sunday
By DAVID ROGERS | 9/26/08 8:06 PM EDT
Updated: 9/26/08 8:06 PM EDT
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