Politics

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Pablo Martinez Monsivais/AP

Bailout Agreement in Disarray

September 26, 2008 11:08 AM
by Josh Katz
The fate of the government’s $700 billion bailout plan is in serious jeopardy after Republicans proposed an alternate plan at last night’s White House meeting.

Agreement in Shambles

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The government bailout plan fell apart last night, even though a three-hour afternoon session of Congress ended with what appeared to be a bipartisan agreement for the $700 billion endeavor. President George W. Bush addressed the nation this morning, reiterating the gravity of the moment and saying that he believes a successful plan will go through.

The deal collapsed after Republicans advocated a “competing bill,” according to The Wall Street Journal.

During the White House meeting that included the two presidential candidates, President Bush and congressional leaders, Bush exclaimed: “This is deteriorating,” one participant said, according to The Boston Globe.

House Republicans have championed a competing plan that, “instead of relying heavily on taxpayer money, could let banks buy insurance for the troubled assets weighing down their books,” the Journal writes.

Democrats criticized Ariz. Sen. John McCain, who on Wednesday announced that he would temporarily suspend his campaign to deal with the economic crisis, for contributing to the bill’s downfall. Sen. McCain’s aides contend that the House Republicans opposed the plan anyway, and McCain is trying to forge an accord.

Treasury Secretary Henry Paulson pleaded with Democrats to stick with the deal, and a bipartisan group involving Paulson met at 9 p.m., lasting about an hour. “I know how frustrated you are by what happened. Let me work this out. Don’t blow it up," House Financial Services Committee chairman Barney Frank, D-Mass., recalled Paulson as saying, the Globe reports.

The bailout deal fashioned Thursday afternoon could still pass, as the Democrats hold the necessary votes in Congress, but “it would essentially saddle Democrats with responsibility for a bailout package that has stirred up strong resistance among both Democrat and Republican voters—with elections just weeks away,” according to the Journal.

The fate of tonight’s scheduled presidential debate is still unclear.

Background: Thursday’s ‘agreement’

The House and the Senate had ostensibly come to an agreement on an outline for the government’s $700 billion Wall Street bailout plan yesterday afternoon. In a meeting that lasted almost three hours, they made some revisions to the original rescue plan, and their revised plan will be presented to the Treasury.

Although work remained to be done on the bill before it could be finalized, “lawmakers in both parties said that few substantive differences and no major obstacles remained,” The New York Times reported.

In that plan, the Treasury Department would “buy up bad mortgage securities from banks in an effort to get them to lend again,” according to CNN. The main revisions to the bill involved the disbursement of money to the government, and executive pay. With the bill, Congress would have dispersed the $700 billion in installments. Pay for the executives of firms seeking government help would have be limited. The bill also gave the government equity in some of the firms “so that taxpayers have a chance to profit if the companies prosper in the months and years ahead,” the Times writes.

Under Thursday’s proposal, Congress would have allocated $250 billion for the bailout right away, and then another $100 billion. Congress would have been able to withhold the remaining $350 billion by overriding a presidential veto, according to Politico.

The accord came before the meeting involving Bush, McCain, Obama, and congressional leaders.

Related Topic: The real cost of the bailout

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