Bailout Meets Resistance From Congress

President Bush’s request for $700 billion to buy up mortgage-related assets from financial institutions is meeting resistance from both Republicans and Democrats.A key Republican on the Senate’s banking committee, expressing worries that the Treasury Department would waste taxpayer money, counseled against swift passage of the plan. And Democrats tried to couple the bailout of Wall Street with more relief for those facing home foreclosures.The Democratic congressional leadership is warming to the idea of giving Treasury Secretary Paulson the authority to spend hundreds of billions of dollars to buy up toxic mortgage assets from banks. Still, after the administration had taken over Fannie Mae and Freddie Mac and moved to do the same at American International Group this month without much involvement of Congress, lawmakers were eager to shape the details this time around.Plans circulated by Democrats called for more than just outright purchases of mortgage assets: They demanded that the government gain an equity stake in the companies that accept bailout money.Mr. Paulson has agreed to provide some assistance to prevent foreclosures on mortgages that would be bought by the Treasury from financial institutions under the plan, a top House Democrat, Barney Frank, chairman of the Financial Services Committee, said.Also, the administration had agreed to the creation of an oversight board that could investigate how the Treasury Department spent the money, Mr. Frank, who is leading the negotiations with the administration, said.The Treasury has asserted that it would have the authority to decide which banks to purchase mortgage assets from, which assets to purchase, and, down the road, when to sell the assets back on the market. That appears to be less up for negotiation. Mr. Frank yesterday, citing the appointments clause of the Constitution, said any oversight board would not have veto power over how the money is spent.That rankled members of both parties.Senator McCain said he was “greatly concerned that the plan gives a single individual the unprecedented power to spend $1 trillion on the basis of not much more than ‘Trust me,'” the Associated Press reported.“Paulson gets 700 billion for all the cronyism he can conceal,” a Democrat from Southern California, Rep. Brad Sherman, said in a phone interview. “Do you really think they’re not going to look at the financial donations to the Republican Party when they decide which tranche of assets to pay 76 cents on the dollar for as opposed to 67 cents?”In the coming days the haggling over details is expected to include whether the bailout package will carry terms providing government oversight of executive compensation at firms that choose to do business with the bailout fund. Such a condition could discourage companies from participating, Mr. Paulson has warned.Mr. Frank responded yesterday saying that if some executives would put their own pay above helping the economy then “we’re worse off than we thought.”While the administration may have agreed to work to prevent foreclosures on mortgages acquired by the government, another effort to aid individual homeowners will be more hotly contested. Democrats are seeking to give bankruptcy judges the authority to change the terms of any mortgage to prevent foreclosure. Republicans have previously opposed that proposal, which is expected to become a major sticking point in negotiations in the coming days.Saying that the bailout “can’t just be a plan for Wall Street; it has to be a plan for Main Street,” Senator Obama called for several conditions on the bailout, the AP reported. He called for Congress to focus on passing a second economic stimulus spending plan that Democrats have sought in recent weeks.Yesterday, President Bush called for quick Congressional action.“The whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts,” Mr. Bush said.And, in criticism directed to the Democratic legislators, he said that “it would not be understandable if members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan.”Rep. Sherman, who convened a group of Democratic congressman yesterday who are skeptical of the proposal, said that Democrats were wary of being pressured into acting quickly.“I don’t think there’s a single Democratic member who hasn’t muttered something today about the Iraq war vote,” he said.The ranking Republican on the Senate’s banking committee, Senator Shelby, also appeared ready to dig his heels in against quick passage of the bailout bill.“I am concerned that Treasury’s proposal is neither workable nor comprehensive, despite its enormous price tag,” he said. “In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts.”He called for a “public examination of the problem and alternative solutions.”The Dow fell more than 372 points yesterday as the bailout plan began inching through Congress.

Bailout Meets Resistance From Congress

Bailout Meets Resistance From Congress

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