Bush makes case for bailout

WASHINGTON – As negotiators raced the clock in search of a compromise, President Bush used a rare prime-time address to the nation Wednesday to try to convince a skeptical public and rebellious Republicans that the government must put $700 billion of taxpayers’ money at risk to bail out the financial system.

Putting his battered personal prestige on the line, Bush painted a stark picture of the nation’s financial condition:

“We’re in the midst of a serious financial crisis. … Our entire economy is in danger,” he said. “America could slip into a financial panic”

“This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America’s overall economy,” Bush said. “It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America’s financial system is back on track.”

Only a handful of times in his presidency has Bush resorted to a direct prime-time appeal to the nation on a single subject. He did it after the Sept. 11, 2001, terrorist attacks, on the eve of the Iraq war, and after Hurricane Katrina. Most recently, he delivered such a speech to announce why he was sending more troops to Iraq rather than bringing them home and, last September, to report the start of a drawdown.

Now, with conservative members of his own party deserting him in droves and a wide swath of financially pressed voters unconvinced that the government should underwrite a rescue for giant financial institutions, Bush went to the well again.

“I know that Americans sometimes get discouraged by the tone in Washington and the seemingly endless partisan struggles,” Bush said, “yet history has shown that, in times of real trial, elected officials rise to the occasion. And together we will show the world once again what kind of country America is: a nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.”

Reflecting the pressures underlying the situation – with financial markets still jittery and credit for day-to-day economic activity apparently freezing up – Bush said he would convene a meeting today at the White House with leading Democrats and Republicans, including the two parties’ presidential nominees, in an effort to reach agreement on a rescue plan. It was unclear, however, whether participants in such a meeting could deliver supporting majorities in Congress.

Treasury Secretary Henry A. Paulson, who is the administration’s point person on the rescue effort and underwent a second day of rough treatment defending the plan on Capitol Hill, found himself in the awkward position of finding Democratic leaders more receptive to working out an agreement than members of his own Republican Party.

The secretary indicated he was ready to give ground on some facets of the plan, so long as it preserved the core principle of federal action to soak up the toxic mortgage-backed securities threatening to paralyze the financial system and thus damage the whole economy.

Hours before Bush’s speech, House Speaker Nancy Pelosi, D-Calif., and House Minority Leader John A. Boehner, R-Ohio, issued a joint statement saying they were “working in a bipartisan manner” and had “made progress” on a bill. But even as the substance of a deal began to take shape, the politics were in turmoil. Republican presidential nominee Sen. John McCain declared that the “the plan on the table will (not) pass” and announced he was leaving the campaign trail to return to Capitol Hill to lead negotiations, a move panned by Democrats as a political stunt.

House Republicans have emerged as the most difficult bloc of votes, with moderates fearful of the price tag and conservatives opposed to the rejection of free-market principles implicit in the plan. A meeting Tuesday morning with Vice President Cheney only increased their defiance.

“The Paulson proposal has not gotten the traction required to complete this process by the end of the week,” said Rep. Adam Putnam, R-Fla., the third-ranking Republican in the House.

For their part, key Democrats said they would support the administration measure only if it was modified to meet their concerns – chief among them, preventing profiteering by Wall Street executives who get help and assuring taxpayers the right to share in the profits of Wall Street firms that benefit from the bailout. Some also said government funds should be released in installments, with an opportunity to judge the bailout’s effectiveness as it proceeded.

Sen. Charles E. Schumer, D-N.Y., said, “The question is, first … do they actually need the whole $700 billion? And, second, what kind of checkpoints are there along the road?”

The give and take among the key players was reflected in Paulson’s comments during the hectic day. He had opposed capping executive compensation and giving the government a stake in participating firms, because he said those provisions could reduce the plan’s chances of success. But he told the House Financial Services Committee, “The American people are angry about executive compensation, and rightfully so. We must find a way to address this in the legislation.”

Committee Chairman Barney Frank, D-Mass., said Paulson “accepts the fact” that any plan must enable the government to take equity stakes in participating firms.