WASHINGTON — Congressional negotiators’ carefully-crafted agreement on a $700 billion rescue plan threatened to unravel Thursday as lawmakers at an often tense White House meeting clashed over details.
As Republican presidential nominee John McCain looked on, House Republican Leader John Boehner raised concerns that the plan would be too costly to taxpayers, and offered an alternative plan.
Democrats were mad.
"What this looked like to me was a rescue plan for John McCain," said Senate Banking Committee Chairman Christopher Dodd of the Republican objections.
His reference was to McCain's eleventh-hour intervention in the negotiations, when he declared he was suspending his campaign and postponing Friday night's debate with Democrat Barack Obama to help negotiate a bailout plan.
Democrats think that Republicans were backing away from a compromise many of them agreed to earlier Thursday — without McCain's involvement — in order to give McCain time to play a role and perhaps appear as a rescuer.
Senate Majority Leader Harry Reid, D-Nev., said he believed the breakdown was simply an effort to allow McCain to miss Friday night's scheduled debate with Obama.
Rep. Barney Frank, chairman of the House Financial Services Committee, seconded that belief. "I think McCain was hurting politically," Frank said. "I think this was a campaign ploy."
When McCain arrived in Washington to discover that an agreement was near, Frank said, it became necessary to upset it so that McCain could later be seen to have played a role. "He's making it harder to get things done," Frank said.
Republicans, in contrast, said there reservations on the bailout plan were principled. The plan, they said, had too much government involvement in private industry and too high potential liabilities for taxpayers.
"That agreement is obviously no agreement," said Sen. Richard Shelby, R-Ala., as he emerged from the White House meeting.
The lawmakers spoke after spending an hour in what was supposed to be a somber show of bipartisan unity at the White House. The session, hosted by President Bush and featuring the two presidential candidates as well as House and Senate leaders, came hours after the Democratic and Republican negotiators had issued a one-page "agreement on principles."
After the House Republican rebellion at the White House cast doubt on the agreement's fate, negotiators reconvened Thursday night, hoping once again to find common ground. But they were uncertain how to handle the Republican alternative, whose chief feature would permit the government to provide insurance to firms to buy troubled assets rather than spend taxpayer money on them.
"Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem," a GOP fact sheet said.
Under the plan, firms would pay insurance premiums to the government in return for coverage.
"We feel it is best to resort to private capital first,” said Rep. Eric Cantor, R-Va., who led the effort, which is backed by Spencer Bachus, R-Ala., the top Republican on the House Financial Services Committee _ and who helped negotiate the bipartisan agreement.
McCain, who has slipped well behind Democratic nominee Barack Obama in most recent presidential polls, spoke briefly at the White House meeting, where Obama outlined a series of principles that he wants addressed in any legislation.
Obama told CNN he still thought a deal could be reached, though he acknowledged that “I still think there’s still some work that needs to be done.” McCain tried to paint himself as a consensus-maker, telling ABC News “I believe we’ll reach a successful conclusion. Members are aware of the crisis situation that we’re in.
“They do have concerns … about $700 billion or a trillion dollars, that need to be addressed so that this is a genuine, bipartisan, bicameral agreement.”
The Arizona senator is not a member of the Senate Banking Committee, has never been influential in setting congressional financial policy, and was not involved in the negotiated agreement in principle.
Said Sen. Reid: “Anyone who tried to understand what John McCain said (at the White House) couldn’t.”
Among the main points reached in the bipartisan agreement in principle:
Earlier, negotiators had produced a one-page "agreement on principles" that includes:
- Funding. Treasury would be authorized to spend $700 billion, but would get only $250 billion immediately, with another $100 billion to be released once the Treasury secretary certifies the money is needed. The other $350 billion could be canceled if Congress passed a joint resolution of disapproval.
- Executive pay. The Treasury Department would "set standards to prevent excessive or inappropriate executive compensation for participating companies."
- Taxpayer equity. Taxpayers could share in the profits of firms that benefit from the bailout as they return to financial health.
- Oversight. The legislation would establish a "strong oversight board with cease and desist authority," as well as an independent inspector general who would monitor "the use of the Treasury Secretary's authority." The Government Accountability Office, Congress' investigative arm, also would audit the use of bailout funds. Regular detailed reports to Congress on the program would be required.
- Homeowners. The agreement mandates maximum coordinated efforts to modify mortgages for homeowners at risk of foreclosure; requires loan modifications for mortgages owned by the federal government; and directs that a percentage of future profits go to federal housing funds.
- Judicial review. The government would be barred from "acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law," which ensures the possibility of legal challenges in court. The original administration plan would have prohibited judicial review.
To help push the package, lawmakers from both parties, including Sens. John McCain and Barack Obama, the Republican and Democratic presidential candidates, respectively, were meeting with President Bush at the White House later Thursday afternoon. McCain and Obama were not present in the congressional negotiations that produced the agreement in principle.
One sign of potential trouble came from conservative House Republicans, who were offering their own plan, one that would require less government intervention. It would permit Washington to provide insurance to firms that buy troubled assets. Firms would pay insurance premiums to the government in return for coverage.
"We feel it is best to resort to private capital first," said Rep. Eric Cantor, R-Va., who led the effort. Taxpayers "should not have to pay to bail out Wall Street."
Rep. Spencer Bachus of Alabama, the top Republican on the House Banking Committee, sat in on the negotiations Thursday and said he was not sure that House GOP members would embrace the package, though, "I think we're closer."
Also complicating final agreement was the presidential campaign. McCain said that he's suspending his campaign to help draft bipartisan legislation, and Obama's camp boasted that he'd played an important role in the executive pay negotiation.
But Banking Committee staff said that while Obama's staff stayed in touch with negotiators, the senator had no apparent role in brokering any deal.
Democrats warned McCain, who is not a member of the Senate Banking Committee, not to try to take credit for all the work the negotiators have done in recent days in his absence.
"I'm delighted that John is expressing himself on this issue," Dodd said. "I have heard from Obama on numerous occasions these last couple days. I have never heard from John McCain on the issue . . . I'm just worried a little bit that sort of politicizing this problem, sort of flying in here, I'm beginning to think this is more of a rescue plan for John McCain and not a rescue plan for the economy."
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