{"id":4969,"date":"2008-09-29T01:54:03","date_gmt":"2008-09-28T22:54:03","guid":{"rendered":"http:\/\/www.turkishnews.com\/en\/content\/?p=4969"},"modified":"2013-10-12T22:29:10","modified_gmt":"2013-10-12T19:29:10","slug":"breakthrough-reached-in-negotiations-on-us-bailout","status":"publish","type":"post","link":"https:\/\/www.turkishnews.com\/en\/content\/2008\/09\/29\/breakthrough-reached-in-negotiations-on-us-bailout\/","title":{"rendered":"Breakthrough reached in negotiations on U.S. bailout"},"content":{"rendered":"
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Nancy Pelosi, the speaker of the House of Representatives, leaving a meeting on the bailout package in Washington. (Yuri Gripas\/Reuters)<\/div>\n

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By David M. Herszenhorn and Carl Hulse<\/span><\/span><\/strong><\/div>\n
Published: September 28, 2008<\/div>\n<\/div>\n

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WASHINGTON<\/span><\/span>:<\/strong> U.S. Congressional leaders and the Bush administration reached a tentative agreement Sunday on what may become the largest financial bailout in American history, authorizing the Treasury to purchase $700 billion in troubled debt from ailing firms in an extraordinary intervention to prevent widespread economic\u00a0collapse.<\/p>\n

Officials said that Congressional staff members would work through the night to finalize the language of the agreement and draft a bill, and that the bill would be brought to the House floor for a vote on\u00a0Monday.<\/p>\n

The bill includes pay limits for some executives whose firms seek help, aides said. And it requires the government to use its new role as owner of distressed mortgage-backed securities to make more aggressive efforts to prevent home\u00a0foreclosures.<\/p>\n

In some cases, the government would receive an equity stake in companies that seek aid, allowing taxpayers to profit should the rescue plan work and the private firms flourish in the months and years\u00a0ahead.<\/p>\n

The White House also agreed to strict oversight of the program by a Congressional panel and conflict-of-interest rules for firms hired by the Treasury to help run the\u00a0program.<\/p>\n

The administration had initially requested virtually unfettered authority to operate the bailout program. But as they moved toward clinching a deal, both sides appeared to have given up a number of contentious proposals, including a change in the bankruptcy laws sought by some Democrats to give judges the authority to modify the terms of first\u00a0mortgages.<\/p>\n

Congressional leaders and Treasury Secretary Henry Paulson Jr. emerged from behind closed doors to announce the tentative agreement at 12:30 a.m. Sunday, after two days of marathon\u00a0meetings.<\/p>\n

“We have made great progress toward a deal, which will work and be effective in the marketplace,” Paulson said at a news conference in Statuary Hall in the\u00a0Capitol.<\/p>\n

In the final hours of negotiations, Democratic lawmakers, including Representative Rahm Emanuel of Illinois and Senator Kent Conrad of North Dakota, carried pages of the bill by hand, back and forth, from Speaker Nancy Pelosi’s office, where the Democrats were encamped, to Paulson and other Republicans in the offices of Representative John Boehner of Ohio, the House minority\u00a0leader.<\/p>\n

At the same time, a series of phone calls was taking place, including conversations between Pelosi and President George W. Bush; between Paulson and the two presidential candidates, Senator John McCain and Senator Barack Obama; and between the candidates and top\u00a0lawmakers.<\/p>\n

“All of this was done in a way to insulate Main Street and everyday Americans from the crisis on Wall Street,” Pelosi said at the news conference. “We have to commit it to paper so we can formally agree, but I want to congratulate all of the negotiators for the great work they have\u00a0done.”<\/p>\n

In a statement, Tony Fratto, the deputy White House press secretary, said: “We’re pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our\u00a0economy.”<\/p>\n

A senior administration official who participated in the talks said the deal was effectively done. “I know of no unresolved open issues for principals,” the official\u00a0said.<\/p>\n

In announcing a tentative agreement, lawmakers and the administration achieved their goal of sending a reassuring message ahead of Monday’s opening of the Asian financial\u00a0markets.<\/p>\n

Lawmakers, especially in the House, are also eager to adjourn and return home for the fall campaign\u00a0season.<\/p>\n

Obama and McCain both expressed support for the rescue package early on Sunday, while adding that it was hardly a moment for taxpayers to\u00a0cheer.<\/p>\n

“This is something that all of us will swallow hard and go forward with,” McCain said in an interview on ABC’s “This Week.” “The option of doing nothing is simply not an\u00a0option.”<\/p>\n

Obama, in a statement, said: “When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration. But this step is\u00a0necessary.”<\/p>\n

The backing of the presidential candidates will be crucial to Congressional leaders seeking to generate votes for the bailout plan among lawmakers, especially those up for re-election in November. The general public has bristled at the notion of risking $700 billion in taxpayer funds to address mistakes on Wall Street, and many constituents have urged their elected officials to vote against the\u00a0plan.<\/p>\n

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and\u00a0resold.<\/p>\n

Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the\u00a0cost.<\/p>\n

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any\u00a0losses.<\/p>\n

Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue\u00a0effort.<\/p>\n

The Treasury would be required to create the insurance program, officials said, but not necessarily to use it. Paulson had expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But final details were not immediately\u00a0available.<\/p>\n

Saturday’s intense negotiating effort followed a tumultuous week, including a contentious meeting at the White House with Bush and the two presidential\u00a0candidates.<\/p>\n

That meeting had moments of drama, including a blunt warning by Bush. “If money isn’t loosened up, this sucker could go down,” he said. It ended with angry recriminations after House Republicans scotched a near-agreement from earlier in the\u00a0day.<\/p>\n

Paulson scrambled to revive the talks, and they resumed almost immediately. Congressional and Treasury staff then worked all of Friday and through the night, ending in the\u00a0predawn.<\/p>\n

Paulson and Congressional leaders stepped in at 3 p.m. Saturday and were in direct negotiations for most of the rest of the night. And immediately after the news conference, staff members began efforts to finalize the\u00a0language.<\/p>\n

Even then, their work is hardly\u00a0over.<\/p>\n

Congressional leaders who want the bailout to pass with solid bipartisan support had already begun to anxiously court votes, mindful of the difficulty they could face in a high-stakes election\u00a0year.<\/p>\n

Public opinion polls show the bailout plan to be deeply unpopular. Conservative Republicans have denounced the plan as an affront to free market capitalism, while some liberal Democrats criticize it as a giveaway to Wall\u00a0Street.<\/p>\n

Representative Roy Blunt of Missouri, the chief negotiator for House Republicans, who have been among the most reluctant to support the plan, expressed some satisfaction but did not commit his members’\u00a0support.<\/p>\n

“We need to look and see where we are on paper tomorrow,” Blunt said. “We have been talking about how we can make these things work in a way that our conference can come\u00a0together.”<\/p>\n

Representative Barney Frank of Massachusetts, the lead negotiator for the House Democrats, said that there was no expectation of making anyone\u00a0smile.<\/p>\n

“This was never going to be a bill that was going to make people happy,” he said. “No solution to a problem can be more elegant than the problem itself. We are dealing with a very difficult\u00a0problem.”<\/p>\n

“Given the dimensions of the problem, I believe we have done a good job,” he added. “It includes genuine\u00a0compromises.”<\/p>\n

Aides described a tense meeting on Saturday afternoon that included Senator Max Baucus, Democrat of Montana, shouting at Paulson about executive pay\u00a0caps.<\/p>\n

Outside, stunned tourists visiting the Capitol watched as camera operators shoved one another to get footage of lawmakers talking outside of the meeting\u00a0room.<\/p>\n

At one point, when too much information was leaking out, staff members’ BlackBerrys were confiscated and collected in a trash\u00a0bin.<\/p>\n

While Congressional Republicans sent only their chief negotiators, Blunt and Senator Judd Gregg of New Hampshire, at least nine Democrats with competing priorities piled into the meeting, surprising the Republicans but apparently not unsettling\u00a0them.<\/p>\n

The centerpiece of the rescue effort remains the plan for the government to buy up to $700 billion in troubled assets from financial firms as a way to free their balance sheets of bad debts and to help restore a healthy flow of credit through the\u00a0economy.<\/p>\n

The money will disbursed in parts, with an initial $250 billion to get the rescue effort under way, followed by another $100 billion upon a report by Bush to\u00a0Congress.<\/p>\n

The president could then request the balance of $350 billion at any time. If Congress disapproved, it would have to act within 15 days to deny the Treasury the\u00a0money.<\/p>\n

Early in the day, the two presidential nominees were active from the sidelines. McCain telephoned Congressional Republicans to sound them out, and Obama got regular updates by phone from Paulson and top\u00a0lawmakers.<\/p>\n

Some lawmakers have made clear that they will not vote for the bailout plan under virtually any terms. “I didn’t want to be in the negotiations because I object to the basic principles of this,” said Senator Richard Shelby of Alabama, the senior Republican on the banking committee, who would normally be his party’s point\u00a0man.<\/p>\n

Pressed about his role, Shelby replied, “My position is ‘No.’ ”<\/p>\n

Officials, including Bush, stepped up efforts to sell the plan to the American public, which, according to opinion polls, is deeply\u00a0skeptical.<\/p>\n

“The rescue effort we’re negotiating is not aimed at Wall Street; it is aimed at your street,” Bush said in his weekly radio address. “There is now widespread agreement on the major principles. We must free up the flow of credit to consumers and businesses by reducing the risk posed by troubled\u00a0assets.”<\/p>\n

In a brief speech on the Senate floor, Senator Kent Conrad, Democrat of North Dakota, said: “It’s not just going to be Wall Street. The chairman of the Federal Reserve has told us if the credit lockup continues, three million to four million Americans will lose their jobs in the next six\u00a0months.”<\/p>\n

The ultimate cost of the rescue plan to taxpayers is virtually impossible to know. Because the government would be buying assets of value \u2014 potentially worth much more than the government will pay for them \u2014 there is even a chance the rescue effort would eventually return a\u00a0profit.<\/p>\n

Some Democrats had sought to direct 20 percent of any such profits to help create affordable housing, but Republicans opposed that and demanded that all profits be returned to the\u00a0Treasury.<\/p>\n

Jeff Zeleny and Robert Pear contributed\u00a0reporting.<\/em><\/p>\n

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