Bush: Rescue to pass
President sought to reassure markets bailout will pass, despite breakdowns.
By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: September 26, 2008: 10:03 AM ET
NEW YORK (CNNMoney.com) -- President Bush on Friday sought to reassure markets that Congress, despite a breakdown in negotiations on Thursday, would pass a $700 billion financial rescue plan.
"There are disagreements over aspects of the rescue plan. But there's no disagreement something must be done," the president said shortly after the U.S. stock market opened sharply lower on concerns that the bailout talks were being scuttled by politics. "The legislative process isn't pretty. But we are going to get a rescue package passed."
The congressional negotiations over the proposed package were set to resume on Friday.
On Thursday, Bush summoned lawmakers and the presidential candidates to the White House to rally consensus behind his plan. Instead, the meeting revealed a deep split between Democrats and House Republicans.
Late-night talks between lawmakers and Treasury Secretary Henry Paulson - which were being conducted while federal banking regulators and executives were announcing the seizure and sale of Washington Mutual after the biggest bank failure in history - failed to reach agreement.
Rep. Barney Frank, D-Mass., the lead House Democrat on the issue who had been in close talks with Paulson for days, accused Republicans of refusing to negotiate.
"At this point, we have absolutely no participation or cooperation from House Republicans," Frank said.
While talks are set to resume Friday morning, any hopes of a clean, bipartisan legislative effort have broken down and the prospect of emergency weekend work on Capitol Hill looms large.
Agreeing on principles
Earlier in the afternoon on Thursday, the mood on Capitol Hill was very different.
Frank, Sen. Christopher Dodd, D-Conn., and other key lawmakers negotiating with Paulson announced that they had reached agreement on a set of principles for legislation to enact the historic proposal.
The bailout proposal - the most dramatic government intervention in the financial system since the Great Depression - calls for the Treasury Department to buy up bad mortgage securities from banks in an effort to get them to lend again.
The proposal, as amended by leaders in both chambers, will help homeowners, curb executive pay packages at participating firms and provide oversight of Treasury's actions, Dodd said in a lunchtime address.
"We've reached a fundamental agreement on a set of principles, one, for taxpayers, which is tremendously important," he said. "We're very confident we can act expeditiously."
A few hours later, after a widely anticipated White House meeting at which Bush said he expected a deal could be crafted "very shortly," the negotiations had broken down.
Details on the plans
The principles the Democrats said had been agreed upon call for Congress to make $250 billion available immediately with $100 billion available, if needed, without requiring additional congressional approval, said two senior Democratic aides familiar with the negotiations. The second half of $350 billion would then become available by a special approval of Congress.
On executive compensation, the draft would require limits on compensation for executives of any company participating in the bailout. These caps would apply for as long as the company is in the program. This would include some language to limit excess "golden parachutes."
Treasury would also get an equity stake in the companies being helped by the bailout, though what type remains to be worked out.
But House Republicans are not on board, according to Minority Leader Rep. John Boehner, R-Ohio.
"House Republicans have not agreed to any plan at this point," Boehner said Thursday.
Instead, they issued a statement of economic rescue principles that calls for Wall Street to fund the recovery by injecting private capital - not taxpayer dollars - into the financial markets. Easing tax laws would prompt investors to put in their own dollars, they said.
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