US Congress finalizing financial bailout planSeptember 29th, 2008 - 7:44 am ICT by IANS
Washington, Sep 29 (DPA) US lawmakers were on the threshold Sunday of sealing a $700-billion bailout intended to rescue the US economy from the edge of a financial meltdown.They intended to announce a firm agreement by the time Japanese stock markets open Monday morning in Tokyo, after copies of the written draft started circulating in the US capital several hours earlier.
The measure, which is intended to thaw out frozen credit lines with a government purchase of soured mortgage securities, could go to a vote as early as Monday.
Conservative Republicans in the House of Representatives have been the main roadblock to the emergency rescue plan. They wanted a government-run insurance programme for healthy mortgage assets and demanded that Wall Street carry more of the burden if the government doesn’t recover its money.
Lawmakers were studying the final draft written by staffers, who worked through the night to make sure those provisions were there, and were holding off comment until completing their review.
“We’re waiting to see what this looks like on paper to see if we have an agreement,” said Eric Cantor, a top Republican legislator and fiscal conservative in the House.
The breakthrough was announced just after midnight by weary Congressional leaders including House Speaker Nancy Pelosi, plus Treasury Secretary Henry Paulson. They described having made “great progress” on an agreement but gave details at the time.
Paulson, a top Wall Street investment banker until being named to head the Treasury Department two years ago, said that the deal would be effective in stabilizing the marketplace and protecting taxpayers “to the maximum extent possible.”
“I think we’re there. So far so good,” he said.
It was the first time in nine days of tough negotiations and harsh words that such a high-ranking group appeared together in public to speak about the rescue plan.
Majority Democrats are worried about the political fallout of the Wall Street unpopular bailout, as expressed by constituents via angry emails and phone calls. The centre-left majority has insisted that Republican legislators get solidly behind the plan proposed by Republican President George W Bush.
But a weakened Bush, who has less than four months in office, has little clout with Republicans in Congress who already blame his low approval ratings for their loss of majority two years ago.
With November 4 presidential and congressional elections looming, many lawmakers on both sides of the aisle will likely vote against the plan, lawmakers have said.
Two weeks of financial turmoil in the United States have sparked havoc on world markets. Bush has made nearly daily pleas to Congress and the US public to understand how near the country was to a financial calamity.
The White House has already conceded to demands by Democrats and Senate Republicans for limits on executive compensation in firms seeking government help, to insist on partial government equity stakes in some companies, to set up a bipartisan oversight panel and to give more help to homeowners against mortgage foreclosures, Pelosi said.
“For the first time in history there will be restrictions on executive salaries,” Barney Frank, chairman of the House Committee on Finance and a key player in the negotiations, told CNN Sunday morning.
The two new concessions in the deal announced early Sunday morning were made in response to demands by House Republicans, two key legislators told CNN Sunday morning.
One would require Wall Street to make up the difference if the government does not recoup the $700-billion layout within five years, according to Frank and Cantor.
“We want to make sure Wall Street shares the pain of the plan,” said Cantor.
A second concession requires the government to set up an insurance programme for Wall Street to guarantee the estimated $2 trillion in mortgage assets that are performing well but could be threatened by the downward spiral of the bad loans, Cantor said.
The government hopes that the bargain-basement assets it buys will eventually regain value in a calmer, stabilized market, to recoup taxpayer costs as the slumping housing market recovers and the rate of foreclosures eases.
Paulson has even said that the government could make a profit.
During the week-long negotiations, legislators have also reduced the initial cost by half to $350 billion, with the remainder to be authorized later, the Bloomberg financial news service reported.