$700B Bailout Plan Breaks Apart:
To Be Continued

McCain's Intervention Questioned by Dems and Reps

JENNIFER LOVEN and JULIE HIRSCHFELD DAVIS / AP 25sep2008

Urgent efforts to lash together a $700 billion rescue plan for the national economy broke apart Thursday night, hours after key lawmakers had declared they had reached a deal.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sped to Capitol Hill to try to revive or rework the proposal that the administration says must be quickly approved by Congress to stave off economic disaster.

Congressional leaders were to meet with the economic chiefs into the night.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) — Key members of Congress claimed agreement Thursday on an outline and crucial details of an urgent multibillion-dollar plan to stave off national economic disaster, but a historic White House meeting with President Bush, the two men fighting to replace him and other congressional leaders broke up with conflicts in plain view.

After six days of intensive talks on the $700 billion package urgently requested by the Bush administration, with Wall Street tottering and the presidential election nearing, there was more confusion than clarity.

A tentative accord in principle among influential Democratic and Republican lawmakers was announced at midday, giving the Bush administration just a fraction of the money it wanted up front, with half the $700 billion total subject to a congressional veto, congressional aides said.

But conservatives were still in revolt, balking at the astonishing price tag of the proposal and the heavy hand of government that it would place on private markets. Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement "is obviously no agreement."

Both of Congress' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also denied there was any deal. And the White House called the earlier announcement progress but also said it was reviewing the outline with more work needed to finalize a bill for Congress to rush into law.

There is wide agreement the U.S. economy is in peril, with financial institutions going under or near the edge and recession looming along with the resulting layoffs and increased home foreclosures.

There had been hopes for broad agreement, too, on a prescription by now, with a confident White House announcement by the president, John McCain, Barack Obama and congressional leaders.

But the best McConnell would say afterward was, "It's clear that more progress is needed and we must continue to work together quickly to protect our economy."

One group of House GOP lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the government purchase the assets. Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead.

Democrat Obama and Republican McCain, who have both sought to distance themselves from the unpopular Bush, sat down with the president at the White House for an hourlong afternoon session that was striking in this brutally partisan season — but also, according to one participant, "a full-throated discussion." By also including Congress' Democratic and Republican leaders, the meeting gathered nearly all Washington's political power structure at one long table in a small West Wing room.

"All of us around the table ... know we've got to get something done as quickly as possible," Bush told reporters, brought in for only the start of the meeting. Obama and McCain were at distant ends of the oval table, not even in each other's sight lines. Bush, playing host in the middle, was flanked by Congress' two Democratic leaders, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.

All the visitors left the White House without talking to a huge media group.

Under the accord announced hours earlier among key lawmakers, the Treasury secretary would get $250 billion immediately and could have an additional $100 billion if he certified it was needed, an approach designed to give lawmakers a stronger hand in controlling the unprecedented rescue. Aides described the details on condition of anonymity because they were not authorized to speak publicly.

The plan's centerpiece still is for the government to buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses, and lost jobs.

The Bush administration has made near-daily concessions to demands from the right and the left, among them a limit on pay for executives of bailed-out financial institutions and an equity stake in rescued companies for the government.

Despite the Republican outcry, Banking Chairman Chris Dodd, D-Conn., and Republican Sen. Bob Bennett, among others, said the negotiators from Congress and the administration had arrived at a deal that could win approval. Other key lawmakers said that after days of bare-knuckles negotiations there was little of note left to resolve.

Wall Street showed its pleasure — but the markets closed before the White House meeting and before the negative Republican comments started piling up. The Dow Jones industrials closed some 196 points higher, though that was down from larger gains earlier in the day.

Despite the national prominence of Bush, McCain and Obama, none has been deeply involved in this week's scramble to hammer out a package.

But the developments on the Hill lent fresh purpose to their White House session: the hope of providing bipartisan encouragement — and political cover — for lawmakers of both parties to accept a plan. Bush has asked that lawmakers approve a plan within days, before lawmakers adjourn to campaign for their own re-elections.

So far, though, there was still nothing to sell.

McCain, in particular, was being leaned on by Democrats and fellow Republicans alike to deliver GOP votes. Placating them enough to bring them in line could be a tall order for the Republican presidential nominee who has a checkered relationship with the right wing of his party.

Layered over the White House meeting was a complicated web of potential political benefits and consequences for both Obama and McCain.

McCain hoped voters would believe that he rose above politics to wade into successful, nitty-gritty dealmaking at a time of urgent crisis, but he risked being seen instead as either overly impulsive or politically craven, or both. Obama saw a chance to appear presidential and fit for duty, but was also caught off guard strategically by McCain's surprising gamble in saying he was suspending his campaigning and asking to delay Friday night's debate to focus on the crisis.

___

Associated Press writers Deb Riechmann, Christopher Wills and Beth Fouhy in Washington and researcher Judy Ausuebel in New York contributed to this story.

source: 25sep2008

Dems, some in GOP question McCain's intervention

CHARLES BABINGTON / AP 25sep2008

Sen. John McCain's self-portrait as a bold leader willing to set politics aside to save an endangered financial bailout plan took a pounding Thursday from top Democrats and even some fellow Republicans.

His efforts to re-energize his presidential campaign will partly turn on who wins the public relations battle, destined to play out for days.

Top Democrats in Congress ridiculed McCain's claim Wednesday that negotiations were going nowhere, necessitating his hasty return to Washington to intervene while suspending his campaign.

"It was somewhat stunning" to receive McCain's phone call with that message, said Senate Majority Leader Harry Reid, D-Nev. Talks were proceeding fine without him, Reid said.

Rep. Barney Frank of Massachusetts, the chief House Democrat on the bill, said, "all of a sudden, now that we are on the verge of making a deal, John McCain airdrops himself to help us make the deal."

Even the House's Republican leader, John Boehner of Ohio, passed up a chance to praise McCain's leadership powers shortly before the two men met in the Capitol at midday Thursday. Asked by reporters if McCain could help win House Republican votes for the proposed package, Boehner shrugged and said, "Who knows?"

Other Republicans gave McCain more credit. "They got something done this morning only because McCain came back," said Sen. Jim DeMint, R-S.C. But DeMint later called the proposal "a trillion-dollar Band-Aid that does not contain a single item that will stimulate our economy."

President Bush's biggest worry is House Republicans, many of whom seemed unimpressed Thursday with McCain's heightened interest. Several said it was essential that both McCain and his Democratic opponent, Sen. Barack Obama, back the bailout plan together.

"If McCain and Obama would stand together and take this off the table" as a sharply partisan issue, then wary House Republicans might get on board, said Rep. Zach Wamp, R-Tenn.

Framing the issue in those bipartisan terms, however, complicates McCain's bid to differentiate himself from Obama on leadership issues.

In truth, McCain has faced a no-win situation for days. To support the bailout or a similar plan would put him at odds with millions of voters and many House Republicans at a time his campaign is sliding in the polls. Also, McCain has struggled to distance himself from the unpopular Bush, and embracing the administration's plan would clearly not help.

Obama has an easier path. No one will accuse him of being a Bush clone even if he ends up siding with the administration on this issue. And Democrats in general are more receptive to government regulation of powerful institutions.

McCain's other option was worse. Opposing the main thrust of Bush's plan would have opened him to fierce accusations of walking away from a national crisis. And if a congressional impasse triggered more Wall Street catastrophes, as the administration said it would, the criticism would have been still worse.

McCain's only real option was to say, "I'm the leader, I'm going to put country first," said Republican consultant John Feehery.

McCain tried to do that late Wednesday. Going before TV cameras shortly before Obama did, he signaled his likely support for some version of the costly plan and urged Bush to convene a meeting including Obama. Bush did so, giving McCain and his backers a chance to claim some leadership credit.

"It seemed like this deal yesterday was very close to dead," McCain adviser Mike DuHaime told Fox News on Thursday. "I think you've seen tremendous progress since he made that announcement."

McCain met separately with House and Senate Republicans in the Capitol Thursday. He did not attend meetings where the bailout legislation was being hashed out, and some rank-and-file lawmakers saw little impact from his visit.

"What do I know?" said Rep. Tom Reynolds, R-N.Y., when asked later about the affect of McCain's detour to Washington. Perhaps, he said, the combined efforts of McCain and Obama would give enough political cover to wavering lawmakers to bring more votes to the bailout package.

Meanwhile, Democrats scoffed at McCain's Wednesday night claim that "no consensus has developed" behind the administration proposal, making his intercession important.

House Speaker Nancy Pelosi, D-Calif., told reporters that McCain called her and urged the White House meeting because "nothing was happening and there was no progress being made on all of this."

"And I said, 'Well, Senator, I have good news for you.'" Pelosi said. "'Quite a bit has been done.'"

Reid, the Senate Democratic leader, previously had called on McCain to take a stand on the bailout proposal. By the time McCain called him on Wednesday, Reid told reporters Thursday, progress was well under way.

Reid spokesman Jim Manley said his boss gave McCain a cool reception. It included reading to him a statement that Reid had just released criticizing McCain's plans. "We need leadership, not a campaign photo-op," said the statement that Reid read to its intended target.

Even if McCain fully embraces a bailout package, many Republican candidates elsewhere on ballots will not go along. Rep. Ray LaHood, an Illinois Republican who is retiring, said he probably will vote for the bailout legislation that eventually emerges.

But the Republican running to replace him, LaHood said, "is running against it. Everyone's running against it."

source: 25sep2008