Bush Scrambles To Save $700B Bailout Plan
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
WASHINGTON — President Bush scrambled today to bring rebellious members of his own party behind a multibillion-dollar government bailout of the financial system amid bitter political recriminations from both Democrats and Republicans over collapsed negotiations.
Mr. Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging that lawmakers have a right to express their doubts and work through disagreements, but declaring they must “rise to the occasion” and approve a plan to avert an economic meltdown.
“There are disagreements over aspects of the rescue plan,” he said, “but there is no disagreement that something substantial must be done. We are going to get a package passed.”
On Wall Street, the level of institutional nervousness was palpable, especially after Washington Mutual Inc. became the largest American bank to fail. The Dow Jones industrial average fell more than 100 points, while fears of a deepening economic crisis fed safe-haven buying in Treasury notes.
Earlier today, House Financial Services Chairman Barney Frank declared that an agreement depends on House Republicans “dropping this revolt” against the Bush-requested plan.
The Massachusetts Democrat said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at yesterday’s extraordinary White House meeting, leaving six days of intensive efforts to agree on a bailout plan in tatters only hours after key congressional players of both parties had declared they were in accord on the outlines of a $700 billion bill.
Mr. Bush decided to speak, and also was in constant contact with Treasury Secretary Henry Paulson, who was returning to talks with lawmakers, White House press secretary Dana Perino said. Vice President Dick Cheney canceled planned travel today to New Mexico and Wyoming to remain in Washington and jawbone lawmakers.
And the campaign season’s first face-to-face debate between presidential candidates Senator McCain and Senator Obama, scheduled for tonight, was still in doubt.
Mr. Frank said he did not think that Democrats were going to see a substantially different proposal from the plan the administration has been trying to sell to lawmakers and which had been the focal point of closed-door talks for days. He called the rival proposal being pushed by House conservative Republicans “an ambush plan.”
Participants in a meeting late yesterday afternoon that Mr. Bush had at the White House with congressional leaders, Mr. McCain and Mr. Obama said that it descended into arguments. Disagreements were so deep-seated that some lawmakers wondered aloud just who — and how many — would show up for the resumption of talks, presumably this morning, at the Capitol.
“I didn’t know I was going to be the referee for an internal GOP ideological civil war,” Mr. Frank, said on CBS’s “The Early Show.”
Democrats put the responsiblity on Bush for getting a rescue package back on track.
“We need to get the president to get the Republican House in order,” Senator Schumer, said on the Senate floor. “Without Republican cooperation, we cannot pass this bill.”
Mr. Schumer said Mr. Bush should also “respectfully tell Sen. McCain to get out of town. He is not helping, he is harming. Before Mr. McCain made his announcment, we were making progress.” Mr. Schumer was referring to Mr. McCain’s announcement earlier in the week that he was suspending his campaign to return to Washington for the negotiations on the financial industry crisis.
Mr. McCain met briefly this morning with House Republican Leader John Boehner.
Senator Richard Shelby, an Alabama Republican, said many GOP lawmakers dislike the proposal that has been pushed on the administration’s behalf principally by Paulson.
“Basically, I believe the Paulson proposal is badly structured,” Mr. Shelby said. “It does nothing basically for the stressed mortgage payer. It does a lot for three or four or five banks . … “
Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.
The White House summit meeting had been called for the purpose of sealing the deal that Mr. Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public. But it quickly revealed that Mr. Bush’s proposal had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.
Mr. Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.
And when Mr. Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House’s top Republican refused to send a negotiator.
“This is the president’s own party,” Mr. Frank said at the time. “I don’t think a president has been repudiated so strongly by the congressional wing of his own party in a long time.”
The presence of Mr. McCain and Mr. Obama at the White House session indeed lent a greater aura of urgency — and personal intensity — to the discussion.
Mr. McCain’s leadership in the negotiations “is to try to stop us from yelling at each other, announcing deals that don’t exist, to actually talk to the House and the Senate and get agreement and then go to the press,” Senator Lindsey Graham, a Republican from South Carolina, said on NBC’s “Today” show.
What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Boehner’s blessing.
Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, a Republican from Wisconsin, a chief sponsor, said it was clear that Bush’s plan “was not going to pass the House.”
But Democrats said the same was true of the conservatives’ plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.
At one point in the White House meeting, according to two officials, Mr. McCain voiced support for Mr. Ryan’s criticisms of the administration’s proposal. Mr. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan Mr. McCain favored.
These officials also said that as tempers flared, Bush struggled at times to maintain control.
At one point, several minutes into the session, Mr. Obama said it was time to hear from Mr. McCain. According to a Republican who was there, “all he said was, ‘I support the principles that House Republicans are fighting for.'”
Some at the table took that to mean the conservatives’ alternative proposal, which stands little chance of passage.
Associated Press reporters Julie Hirschfeld Davis and David Espo contributed to this report.