US lawmakers battle to salvage bailout

September 27, 2008 12:00 am

, WASHINGTON, September 27 – US congressional leaders are back in talks Saturday to cobble a massive financial sector rescue deal as the White House called for urgent action, and a new bank failure added to the gloom.

Senate Democratic Majority Leader Harry Reid vowed Congress would stay in session, and not adjourn ahead of the November 4 elections, until the deal was done.

Democrats were upbeat after their eighth straight day of negotiations, with Speaker Nancy Pelosi saying they would get a draft deal "that will be signed by the president and we will be working through the weekend to achieve that end."

And the chair of the Senate banking committee, Barney Frank, also said he was "hopeful," adding: "It’s a very important bill. It’s got to be crafted very carefully."

The news helped to rally Wall Street shares at the end of a bruising week, although most other markets saw steep losses as the talks had earlier appeared to be at an impasse.

Despite repeated pledges from lawmakers and President George W. Bush that a deal was in the offing, there were still signs of discord among rebel Republicans, backing an alternative package to the plan proposed by Treasury Secretary Henry Paulson.

Frank confirmed: "We had two negotiating sessions involving the Senate Democrats, the House Democrats and the Senate Republicans at which the House Republicans declined to participate."

But with lawmakers rolling up their sleeves to get back to work after a day of drama and confusion Thursday, hopes were high that an accord could be forged by the time markets open on Monday.

Bush voiced confidence to visiting British Prime Minister Gordon Brown.

"I told him the plan is big enough to make a difference and I believe it is going to be passed," Bush said as they met in the Oval Office.

With the world’s largest economy in a tailspin, other governments are nervously watching the protracted talks, concerned their economies could fall victim to any contagion.

Brown assured Bush of wide global support for the rescue plan, stressing: "Britain supports the financial plan — and whatever the details of it, it’s the right thing to do to take us through these difficult circumstances."

The prime minister noted that G7 finance ministers would discuss the crisis when they meet October 9, and the International Monetary Fund would take up the situation when it meets October 10.

Reid vowed lawmakers would work through the weekend to try to put something in place before markets open again on Monday.

"We’re going to get this done and stay in session as long as it takes to get it done. We’ll work with the president, modify his plan to make it better for taxpayers and homeowners," he said.

But he blamed the Republicans for delaying tactics.

A deal was almost there Thursday "and then guess who came to town," Reid told reporters after Republican White House hopeful John McCain had dashed back to Washington, putting his campaign on hold to take part in crisis talks.

"The insertion of presidential politics has not been helpful. It’s been harmful," the Democrat said.

Senior Republicans, however, defended McCain’s role as they presented a rival package designed to take the burden off taxpayers and put it back on private investors.

"I think McCain’s role has been entirely constructive. He’s had suggestions. We’re taking these into account and we are going forward," said Senate minority leader Mitch McConnell.

McCain and Democrat Barack Obama clashed in a debate late Friday over how to repair the country’s ailing economy, but both dodged questions over whether they will back the Wall Street bailout plan.

The new Republican plan proposes that the government set up an expanded insurance system financed by banks to rescue individual home mortgages, so that taxpayers do not have to fund the bailout.

In a letter to Democratic House of Representatives Speaker Nancy Pelosi, House Republican leader John Boehner said the alternative proposal "reflects the core free-market, pro-taxpayer principles of our party."

But Paulson and Federal Reserve chairman Ben Bernanke have already rejected the insurance plan as unworkable, and say only the government has the clout to execute the system-wide rescue.


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