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GOP revolt puts loan bailout in doubt

WASHINGTON — A Republican revolt stalled urgent efforts to lash together a national economic rescue plan Thursday, a chaotic turnaround on a day that had seemed headed for an agreement.

Instead, the talks dissolved into a verbal brawl in the Cabinet Room of the White House, warnings from an angry president and pleas from a treasury secretary who — half-jokingly — dropped to one knee and pleaded with the lawmakers.

"If money isn't loosened up, this sucker could go down," President Bush declared Thursday as he watched the $700-billion bailout package fall apart before his eyes.

Weary congressional negotiators worked into the night, joined by Treasury Secretary Henry Paulson, to revive or rework the plan. They gave up after 10 p.m., more than an hour after the lone House Republican involved, Rep. Spencer Bachus of Alabama, left the room.

Democrats blamed the House Republicans for the stalemate. Conservatives have complained that the plan would be too costly for taxpayers and would be an unacceptable federal intrusion into private business.

The implosion spilled out from behind closed doors into public view in a way rarely seen in Washington and left uncertain the fate of efforts to bail out failing financial institutions and restart the flow of credit that has begun to starve the national economy. Talks were to resume this morning.

When congressional leaders and Sens. John McCain and Barack Obama trooped to the White House Thursday afternoon, all signs pointed toward a bipartisan compromise that could be signed into law by the weekend.

"We're in a serious economic crisis," Bush said as the meeting began shortly before 4 p.m. in the Cabinet Room, adding, "my hope is we can reach an agreement very shortly."

Key Democrats and Republicans had announced they had the outlines of a tentative agreement just hours before the White House meeting. That accord would have given the Bush administration just a fraction of the money it wanted up front, subjecting half the $700-billion total to a congressional veto.

But conservatives were still in revolt, balking at the astonishing price tag of the proposal and the hand of government that it would place on private markets.

Once the doors closed, the House Republican leader, Rep. John Boehner, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.

Boehner pressed an alternative that involved a smaller role for the government, and McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand.

The talks broke up in angry recriminations and were followed by news conferences and partisan finger-pointing.

It was the very outcome the White House had intended to avoid, with partisan presidential politics appearing to trample delicate congressional negotiations.

Sen. Christopher Dodd, D-Conn., the chairman of the Senate banking committee, denounced the session as "a rescue plan for John McCain" in an interview on CNN, and proclaimed it a waste of precious hours that could have been spent negotiating.

A top aide to Boehner, Kevin Smith, said Republicans revolted over what they saw as an attempt by Democrats to jam through an agreement early Thursday and deny McCain an opportunity to participate in the agreement.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the session to say the announced agreement "is obviously no agreement."

News of an apparent breakthrough earlier in the day had helped inspire Wall Street, which recorded a 196-point gain for the Dow Jones industrials. The later breakdown seemed likely to send stocks downward again today.

One group of House GOP lawmakers circulated an alternative Thursday that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the United States purchase the assets.

Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead.

The price tag of the administration's plan to bail out tottering financial institutions — and the federal intrusion into private business matters — have been major sticking points for many Republican lawmakers.

"I'm feeling somewhat puzzled at this point," said Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who has been leading negotiations with Paulson. "Sen. McCain and the president between them ought to be able to get House Republicans back to the table."

Information from the New York Times and Washington Post was used in this report.

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GOP revolt puts loan bailout in doubt 09/25/08 [Last modified: Sunday, September 28, 2008 12:24pm]

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