Economy

Bush and Candidates to Meet on Bailout

WASHINGTON — President Bush appealed to
the nation Wednesday night to support a $700 billion plan to avert a
widespread financial meltdown, and signaled that he is willing to
accept tougher controls over how the money is spent.



As Democrats and the
administration negotiated details of the package late into the night,
the presidential candidates of both major parties planned to meet Mr.
Bush at the White House on Thursday, along with leaders of Congress.
The president said he hoped the session would “speed our discussions
toward a bipartisan bill.”
Mr. Bush used a prime-time address to
warn Americans that “a long and painful recession” could occur if
Congress does not act quickly.
“Our entire economy is in danger,” he said.
On
Capitol Hill, Democrats said that progress toward a deal had come after
the White House had offered two major concessions: a plan to limit pay
of executives whose firms seek government assistance, and a provision
that would give taxpayers an equity stake in some of the firms so that
the government can profit if the companies prosper in the future.
Details of those provisions, and many others, were still under
discussion.
Mr. Bush’s televised address, and his extraordinary offer to bring together Senator Barack Obama, the Democratic presidential nominee, and Senator John McCain,
the Republican, just weeks before the election underscored a growing
sense of urgency on the part of the administration that Congress must
act to avert an economic collapse.
It was the first time in Mr.
Bush’s presidency that he delivered a prime-time speech devoted
exclusively to the economy. It came at a time when deep public unease
about shaky financial markets and the demise of Wall Street icons such
as Lehman Brothers has been coupled with skepticism and anger directed at a government
bailout that could become the most expensive in American history.
The
administration’s plan seeks to restore liquidity to the market and
restore the economy by buying up distressed securities, many of them
tied to mortgages, from struggling financial firms.
The address capped a fast-moving and chaotic day, in Washington, on the presidential campaign trail and on Wall Street.
On Capitol Hill, delicate negotiations between Treasury Secretary Henry M. Paulson Jr. and Congressional leaders were complicated by resistance from
rank-and-file lawmakers, who were fielding torrents of complaints from
constituents furious that their tax money was going to be spent to
clean up a mess created by high-paid financial executives.
On
Wall Street, financial markets continued to struggle. The cost of
borrowing for banks, businesses and consumers shot up and investors
rushed to safe havens like Treasury bills — a reminder that credit
markets, which had recovered somewhat after Mr. Paulson announced the
broad outlines of the bailout plan last week, remain under severe
stress, with many investors still skittish.
Senator Christopher J. Dodd,
Democrat of Connecticut and chairman of the banking committee, said a
deal could come together as early as Thursday. “Working in a bipartisan
manner, we have made progress,” the House speaker, Nancy Pelosi, and Representative John A. Boehner, the Republican leader, said in a joint statement.
“We
agree that key changes should be made to the administration’s proposal.
It must include basic good-government principles, including rigorous
and independent oversight, strong executive compensation standards and protections for taxpayers.”
Mr.
Bush used his speech to signal that he was willing to address
lawmakers’ concerns, including fears that tax dollars will be used to
pay Wall Street executives and that the plan would put too much
authority in the hands of the Treasury secretary without sufficient
oversight.
“Any rescue plan should also be designed to ensure
that taxpayers are protected,” Mr. Bush said. “It should welcome the
participation of financial institutions, large and small. It should
make certain that failed executives do not receive a windfall from your
tax dollars. It should establish a bipartisan board to oversee the
plan’s implementation. And it should be enacted as soon as possible.”
The
speech came after the White House, under pressure from Republican
lawmakers, opened an aggressive effort to portray the financial rescue
package as crucial not just to stabilize Wall Street but to protect the
livelihoods of all Americans.
But the White House gave careful
thought to the timing; aides to Mr. Bush said they did not want to
appear to have the president forcing a solution on Congress.
On
Capitol Hill, Mr. Paulson, facing a second day of questioning by
lawmakers, this time before the House Financial Services Committee,
tried to focus as much on Main Street as Wall Street.
“This
entire proposal is about benefiting the American people because today’s
fragile financial system puts their economic well being at risk,” Mr.
Paulson said. Without action, he added: “Americans’ personal savings
and the ability of consumers and business to finance spending,
investment and job creation are threatened.”
But it was the comments of Mr. Paulson, a former chief of Goldman Sachs,
about limiting the pay of executives that signaled the biggest shift in
the White House position and the urgency that the administration has
placed in winning Congressional approval as quickly as possible.
“The American people are angry about executive compensation, and rightly so,” he said. “No one understands pay for failure.”
Officials
said the legislation would almost certainly include a ban on so-called
golden parachutes, the generous severance packages that many executives
receive on their way out the door, for firms that seek government help.
The measure also is likely to include a mechanism for firms to recover
any bonus or incentive pay based on corporate earnings or other results
that later turn out to have been overstated.
Democrats were
also working to include tax provisions that would cap the amount of an
executive’s salary that a company could deduct to $400,000 — the amount
earned by the president.
At the same time, Congressional
Democrats said they were prepared to drop one of their most contentious
demands: new authority for bankruptcy judges to modify the terms of
first mortgages. That provision was heavily opposed by Senate
Republicans.
In addition, Democrats also are leaning toward
authorizing the entire $700 billion that Mr. Paulson is seeking but
disbursing a smaller amount, perhaps only $150 billion, to start the
program, with future funds dependent on how well it is working.
Representative Barney Frank of Massachusetts, the lead negotiator for Congressional Democrats, said
they also planned to insert a tax break to aid community banks that
have suffered steep losses on preferred stock that they own in the
mortgage finance giants Fannie Mae and Freddie Mac.
That
change is in addition to others that already have been accepted by Mr.
Paulson that would create an independent oversight board and require
the government to do more to prevent foreclosures.