WASHINGTON — Scrambling for a swift deal on a $700-billion bailout for failing financial companies, key Democrats and Bush administration officials agreed Monday to include mortgage help for beleaguered homeowners but wrangled over other issues, including "golden parachutes" for executives who will benefit from the deal.
Lawmakers in both parties voiced outrage that taxpayers were being asked to pay for the excesses of Wall Street and that Congress was being prodded to rubber-stamp the biggest federal intervention in the private market since the Great Depression.
Democrats demanded limits on pay packages for executives. The administration was balking at that, and also at a proposal by Democrats to let judges rewrite mortgages to lower bankrupt homeowners' payments.
President Bush prodded Congress during the day to pass the rescue plan quickly, declaring, "The whole world is watching."
But even as negotiators talked, the financial markets threatened to pop another rivet. The Dow Jones industrial average sank 372.25 points, or 3.3 percent.
Although the White House has warned of severe consequences if the bailout plan is not approved by Friday, lawmakers crafting the measure said their work may stretch past that deadline.
Rep. Barney Frank, the House Financial Services Committee chairman, said the administration essentially had forced Congress to the negotiating table by creating an expectation in financial markets that a massive bailout was on the way. "We have gotten closer," Frank said, but "we're not there yet."
Treasury Secretary Henry Paulson agreed to government oversight of the bailout program, including an independent board. The three-page proposal Paulson gave lawmakers over the weekend would have permitted him to run the program without review by other federal agencies or the courts.
Frank said Paulson also agreed that the Treasury should use its power as the new owner of billions of dollars in mortgage-backed assets to help homeowners at risk of foreclosure. Democrats are pressing for provisions to require the Treasury to force banks to rewrite bad loans for struggling homeowners and to forgive part of their debt, using programs at the Federal Housing Administration and other agencies.
Congressional leaders and Treasury officials also said they were close to an agreement over a proposal by some Democrats in which taxpayers could receive an ownership stake, in the form of warrants to buy stock, from companies seeking to unload distressed debt. The administration would accept this provision as long as it did not require it to obtain an equity stake, a Treasury official said.
Despite the progress, the rancorous debate ratcheted up pressure on Paulson and Federal Reserve Chairman Ben Bernanke, the architects of the proposal to let financial institutions around the world pass their most distressed mortgage-related assets to the U.S. Treasury. Both are to appear before the Senate banking committee today, where they must sell the plan to dubious lawmakers and to an increasingly angry and frustrated public.
Wall Street wasn't comforted by the progress. In addition to the Dow plunge, oil prices soared $25 a barrel at one point and gold prices surged anew as investors searched for a safe place to park their money. The dollar took its steepest one-day drop in years.
The emergency legislation would give the government broad power to buy up devalued assets from troubled financial firms in a bid to unlock the flow of credit and stabilize badly shaken markets in the United States and around the globe.
There was growing skepticism among conservative critics, some of whom said they would oppose the plan, and arched eyebrows among good-government groups, who said they would closely monitor the program as it is put into action.
"Treasury's 840-word legislative bailout proposal comes to more than $830-million per word," said Stephen Ellis, the vice president of Taxpayers for Common Sense, a fiscal watchdog group.