WASHINGTON — The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.
The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.
Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.
Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday. Top lawmakers say they would push to enact the plan as early as the coming week.
“We’re going to work with Congress to get a bill done quickly,” President Bush said at the White House. Without discussing specifics, he said, “This is a big package because it was a big problem.”
The proposal is a mere three pages long, but it gives sweeping powers to the government to dispense gigantic sums of taxpayer dollars in a program that would be sheltered from court review.
“It’s a rather brief bill with a lot of money,” said Sen. Chris Dodd, D-Conn., the Banking Committee chairman. “We understand the importance of the anticipation in the markets, but we also know that what we’re doing is going to have consequences for decades to come. There’s not a second act to this — we’ve got to get this right.”
What the plan leaves out
Lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers’ money.
The government must bail out the financial system “because if we don’t, it will have a tremendous impact on American consumers, homeowners, taxpayers and the rest,” House Speaker Nancy Pelosi, D-Calif., said in San Francisco.
But, she added, “We cannot deal with this unless this bailout helps families stay in their homes.”
Senate Majority Leader Harry Reid, D-Nev., said: “We cannot allow ourselves to be in denial about the threat now facing the world economy. From all indications, that threat is real and the consequences of inaction could be catastrophic. Every single American has a stake in preventing a global financial meltdown.”
Signaling what could erupt into a brutal fight with Democrats over add-on spending, the House’s top Republican, Ohio Rep. John A. Boehner, said “efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors and small businesses deserve.”
Bush said he worried the financial troubles “could ripple throughout” the economy and affect average citizens.
“The risk of doing nothing far outweighs the risk of the package. . . . Over time, we’re going to get a lot of the money back.”
He added, “People are beginning to doubt our system, people were losing confidence, and I understand it’s important to have confidence in our financial system.”
Candidates take no stances
Neither presidential candidate took a position on the proposal.
GOP nominee John McCain said he was awaiting specifics and any changes by Congress.
Democratic rival Barack Obama used the party’s weekly radio address to call for help for Main Street as well as Wall Street.
Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle -class voters.
Besides mortgage help and executive-compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility.
Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive-compensation limits and new foreclosure-prevention measures.
Details of those changes were not available Saturday. Bush and Treasury Secretary Henry Paulson conferred by phone for about 20 minutes in the afternoon, gauging how the negotiations were unfolding.
Among the key issues for negotiation is which financial institutions would be eligible. The proposed legislation doesn’t make it clear, leaving open the question of whether hedge funds or pension funds could qualify.
What the president wants to do
The Bush administration is asking Congress for $700 billion to buy troubled mortgage related assets from U.S. financial institutions. According to a draft obtained Saturday by The Associated Press, the proposal would:
• Give the treasury secretary broad authority to buy up to $700 billion in mortgage- related assets from any financial institution in the United States.
• Raise the $10.6 trillion statutory limit on the national debt to $11.3 trillion.
• Allow the treasury secretary to buy, hold and sell the assets in any way he sees fit. That includes the ability to go outside normal government contracting practices to hire private companies to manage them.
• Give the government power to designate financial institutions as “financial agents of the government” and require them to carry out any “reasonable duties” that entails.
• Require the government to report to congressional budget, tax-writing and financial services committees within three months of using the authority and every six months thereafter.
• Instruct the treasury secretary to consider both providing market stability and protecting taxpayers in using the bailout power.
• Expire two years after enactment.
Overheard
“My highest priority will be to protect the American taxpayer to the maximum possible extent, while working to ensure there is a system in place to prevent developments that could prove to be far more costly — additional financial failures, frozen credit markets and economic paralysis. We cannot underestimate the gravity of this moment or fail to rise to the challenge it presents.”
U.S. Sen. Ken Salazar, a Denver Democrat, on a conference call Friday with Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and other senators
“This is an extremely serious situation we find ourselves in, and we stand ready to listen to and work with the administration. This needs to be addressed — and correctly — and shouldn’t be tied to politics and the upcoming elections.”Kaitlyn Knoll, spokeswoman for U.S. Sen. Wayne Allard, a Loveland Republican
“I will work with my colleagues in Congress to ensure that whatever we adopt will stabilize the economy and provide relief for consumers and homeowners.”U.S. Rep. Diana DeGette, a Denver Democrat
“One thing we do not need right now is for Congress to issue a blank check to Wall Street and leave the taxpayers on the hook for billions of dollars in bad investments. Congress should work with the administration to find a comprehensive solution. Any legislation should be . . . not larded up with extraneous matters to score political points.”U.S. Rep. Doug Lamborn, a Colorado Springs Republican
