Bailout faces test in House

WASHINGTON – After a tumultuous week of round-the-clock negotiations, Congress prepared for a difficult vote today on a sweeping $700 billion Wall Street rescue plan to stave off a possible global financial meltdown.

Racing against a self-imposed 6 p.m. EDT deadline Sunday ahead of the opening of Asian financial markets, bleary-eyed Democrats in control of Congress released the text of the Emergency Economic Stabilization Act of 2008. The plan had GOP backing in the Senate, but substantially less Republican support in the House. Democratic and Republican leaders worked through the night this weekend to modify a plan put forth by Treasury Secretary Henry Paulson to remove distressed mortgages and similar toxic assets from the books of banks and other financial firms. Paulson had warned that credit markets are on the verge of seizing up, with grave consequences for consumer lending.

“I am confident this legislation gives us the flexibility to unclog our financial markets and increase the ability of our financial institutions to deliver the credit that will help create jobs,” Paulson said in a statement that praised lawmakers for their tough decision. “We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed.”

President Bush said in a statement Sunday night, “This plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system.”

In detailing legislation that grew to 110 pages from its original three, lawmakers Sunday afternoon chose their words carefully to let angry American voters know they’d been heard.

“It’s very clear that Americans have some reason to be concerned, even angry about where we find ourselves. We know there has been greed on Wall Street,” said Senate Majority Leader Harry Reid, D-Nev.

But the cost of doing nothing was greater than what is being proposed, he said.

“Inaction would paralyze our economy, even now it is difficult for people to get a car loan,” Reid said, adding that “the market is frozen in terms of buying homes in many parts of our country.”

House Speaker Nancy Pelosi, D-Calif., sought to assure Americans that their tax dollars weren’t rescuing the well-heeled on Wall Street.

“People have to know this is not a bailout of Wall Street, it’s a buy-in,” said Pelosi in a Sunday afternoon news conference that touted taxpayer protections and an effort to limit the compensation of some executives who might partake in the rescue effort.

One of the lead GOP negotiators, Sen. Judd Gregg, R-N.H., said he was confident the measure would attract enough members of his party in both chambers of Congress to win passage later in the week.

“I think everybody got what they needed to have,” he said.

Members of both parties supported measures to prevent so-called golden parachutes when a Wall Street executive departs. If a company has had government intervention, the five highest-ranking officials in that company will be denied bonus and incentive pay. And if a company sells as a whole $300 million or more in bad assets, there will be similar restrictions.

Additionally, companies taken over by the government or receiving significant support will have to give Treasury preferred stock that could be sold later when the company recovers, to the benefit of taxpayers.

As lawmakers neared the tentative deal, staff members had their cell phones confiscated to prevent leaks in what had become heavily politicized negotiations. Lawmakers quickly published a copy of the deal online Sunday as night fell, giving an angry American public a look at the compromise ahead of a congressional vote. But computer servers crashed under the weight of so many requests to access the site.

Federal Reserve Chairman Ben Bernanke and Paulson have warned repeatedly that absent an urgent response, credit markets could collapse this week, punishing Wall Street and Main Street alike.

“The deal should go a long way to stabilizing financial markets and putting the financial system on what will be a long road to recovery,” said Mark Zandi, chief economist of economic forecaster Moody’s Economy.com.

The rescue effort won’t fix all that is wrong with the slumping U.S. economy, but it seeks to keep things from getting worse fast.

“It’s mostly a stop-gap to get through the election and let the next president deal with it. You’ve got to get the housing market stabilized and manage to get the economy growing,” said David Wyss, chief economist for rating agency Standard & Poor’s in New York. “This makes it more likely that it will be a mild recession, not a deep recession.”

The presidential campaigns welcomed the legislation and took credit for it – even though Senate staffers say neither candidate was instrumental in getting a deal done.

In a statement, Democrat Barack Obama said it met the four core principles he laid out – independent oversight, treatment of taxpayers as investors, measures to keep homeowners in their homes, and rules to prevent rewarding Wall Street CEOs from cashing in on the rescue.

“While I look forward to reviewing the language of the legislation, it appears that the tentative deal embraces these principles,” said Obama. He later echoed that on CBS’s “Face the Nation.”

Republican John McCain, speaking on ABC’s “This Week,” said, “This is something that all of us will swallow hard and go forward with.”

While House Republicans do not have enough votes to scuttle the package – Democrats have a majority of House seats – Pelosi said she wants about 100 GOP members to vote for it. Not only would that give the plan a bipartisan sheen, it would also give the Democrats political protection.

Should the financial market meltdown worsen despite passage of the rescue plan, Pelosi does not want Republicans blaming the Democratic plan sought by the White House.

Rep. Barney Frank, D-Mass., acknowledged the House vote may be close, since lawmakers will get little reward for doing the right thing.

“In politics, if you keep something from getting worse, you don’t get a lot of credit for it,” he said in a C-SPAN cable interview.