Paulson seems to backtrack as bailout talks begin anew

WASHINGTON — Congressional negotiators got a new push from President Bush Friday morning as they resumed talks aiming at drafting a financial rescue plan — but renegade members of Bush's own party still showed no signs that they were ready to compromise.

It also appeared that Treasury Secretary Henry Paulson was raising questions about "principles" that negotiators thought had been agreed to on Thursday.

According to two people present, Paulson expressed reservations about limiting pay for executives at firms that benefit from the bailout, an equity stake for taxpayers in those companies and the provision that would allow the $700 billion to be available only in stages.

Paulson had indicated at hearings earlier this week that he supported some limits on executive pay, but apparently had questions about specifics.

The mood grew even more uncertain Friday, as House Republican Leader John Boehner of Ohio made it clear that top House GOP lawmakers were united in their bid to get more protection for taxpayers.

Senate Banking Committee Chairman Christopher Dodd, D-Conn., had expressed surprise Thursday when House Republicans proposed an insurance plan to help troubled financial firms. But in a letter addressed to House Speaker Nancy Pelosi, D-Calif., Boehner stressed that no one should have been surprised.

"Over the last week, we have frequently discussed Secretary Paulson's proposal, and I have repeatedly expressed the need for improvements on behalf of myself and my Republican colleagues," the congressman wrote.

Despite that, he said, Democratic leaders repeatedly announced that a bipartisan deal was at hand even though the House GOP reservations had not been addressed. Each time, Boehner wrote, he made it clear that "any such deal did not include House Republicans."

House Minority Whip Roy Blunt, R-Mo., was to join the negotiations Friday, the first time a GOP House leader has been involved.

President Bush tried to give lawmakers a fresh push, saying in a statement Friday morning, "This is hard work. Our proposal is a big proposal. The reason it's big is because we have a big problem. We also need to move quickly," Bush said in halting tones.

He tried to downplay the conflict that has, for now, scuttled any deal.

"Members want to be heard. They want to be able to express their opinions and they should be able to express their opinions," he said in a brief statement delivered just as U.S. stock markets were opening. "There are disagreements over aspects of the rescue plan, but there is no disagreement something substantial must be done."

Remember, Bush said, "the legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan."

Stocks initially plunged but recovered; the Dow Jones Industrial Average was down only about 30 points at 11 a.m. EDT.

The negotiators, including leaders of both parties and Paulson, talked privately in a second-floor Senate office for three hours Thursday night, then agreed to continue deliberations Friday.

Notably absent Thursday night were the rebellious Republicans who scuttled the negotiators' initial deal. Nor was GOP presidential nominee John McCain, who had returned to Washington saying he wanted to help spur bipartisan progress, present.The dissident Republicans, who include some members of the House leadership and top officials from key money committees, insisted that any plan must be far less expensive and involve less government intrusion into private markets than the negotiators' proposal, which would commit $700 billion to the rescue effort.

The House Republicans want instead to allow the government to provide insurance to companies that would buy troubled assets rather than spend taxpayer money on them. The firms would pay insurance premiums to the government in return for coverage.

Dodd said he was unfamiliar with the GOP alternative plan and was not inclined to back it. He and the other negotiators want to commit $700 billion in three phases. They would make $250 billion available immediately and another $100 billion when the Treasury Secretary sees the need. The rest would be available to the Treasury as needed unless Congress blocked the expenditure.

That deal collapsed, at least for the moment, during an often contentious White House summit meeting Thursday afternoon.

Friday, anger was still evident, with Democrats protesting that they were caught in the middle of a GOP squabble.

"I didn't know I was going to be the referee for an internal GOP ideological civil war," Frank�told CBS's "The Early Show."

But Sen. Richard Shelby, the top Republican on the Senate Banking Committee, said on the same program that many members of Congress thought the plans so far do "nothing basically for the stressed mortgage payer. It does a lot for three or four or five banks."