Congressional Leaders Announce Breakthrough in Bailout Bill Negotiations
By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Sunday, September 28, 2008; 12:47 AM
Congressional leaders and the Bush administration last night struck a historic accord to insert the government deeply into the nation’s financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages.
Negotiators emerged from a marathon session in the Capitol about 12:30 a.m. to announce that they had reached agreement on a proposal to give Treasury Secretary Henry M. Paulson Jr. broad authority to organize one of the biggest government interventions in the private sector since the Great Depression.
Full details of the plan were not immediately available. Lawmakers said their staffs would continue working through the night to commit them to paper. Under the plan, first put forward by the Bush administration in a late-night meeting with lawmakers just 10 days ago, Paulson would be authorized to purchase mortgage-backed assets from struggling firms in hopes of easing a credit crunch that has pushed global markets to the brink of collapse.
With home prices plummeting, many of those assets are now almost worthless, and investors have lost confidence in many of the firms that hold them. That has undermined some of the biggest names on Wall Street and caused banks to stop lending money, sparking a credit crisis that threatens to deliver a devastating blow to businesses, consumers and the broader economy.
Administration officials have stressed that the ultimate cost of the bailout would be much less than $700 billion because the government would eventually sell the assets it purchased and recover most, if not all, of what it spends.
Yesterday’s talks, conducted mainly in Speaker Nancy Pelosi’s suite of offices on the second floor of the Capitol, were focused heavily on how to cover the cost of the program so taxpayers don’t get stuck with the bill.
Democrats pressed hard for further taxpayer protections, including a fee that would be imposed on the financial services industry if after five years the government had not fully recouped its money. The proposal, which did not surface in negotiations until yesterday, would help win the support of a fiscally conservative group of House Democrats known as the Blue Dogs, an important bloc of 47 votes.
"We believe that the taxpayer should not be left holding the bag at the end of the day, and we’ve proposed a way to address that," said Rep. Chris Van Hollen (D-Md.), a member of House Speaker Nancy Pelosi’s leadership team.
Paulson and some Republican lawmakers were said to be cool to the idea, though House Republicans also have expressed serious concerns about the cost of the program and have suggested other ideas for limiting taxpayer exposure. A House GOP plan that would allow Treasury to create a program of government insurance for some mortgages was also under discussion.
"While we do believe the Congress needs to act to avert this crisis, we also believe we should not be bailing out Wall Street on the backs of American taxpayers," House Majority Leader John A. Boehner (R-Ohio) said.
Democrats and Republicans from both chambers meeting with Paulson and other administration officials were also working to forge a compromise on a variety of other outstanding issues, including how quickly the government should make money available for the program and whether participating firms should be required to limit executive pay.
Even staunch opponents of the emerging plan said they expected it to pass.
September 28, 2008