From the Wall Street Journal:
Lawmakers Battle Over Rescue Plan
By GREG HITT, DAMIAN PALETTA and DEBORAH SOLOMON
SEPTEMBER 22, 2008
Lawmakers are scrambling to put their mark on the Bush administration’s $700 billion plan to save financial markets — a fast-moving test of wills that could reshape one of the biggest bailouts in U.S. history.
There’s no sign yet that Congress will delay or derail the proposal. Democrats are looking to add provisions that include beefed-up congressional oversight, aid for individual homeowners and changes to bankruptcy laws.
Some of the measures are opposed by the administration. Perhaps the biggest looming fight is over Democratic efforts to require the program’s participants to curb what they pay their executives.
Last week, as deep new fissures opened in global financial markets, the U.S. Treasury unveiled a plan to spend up to $700 billion to buy soured mortgages and mortgage-related securities from financial institutions. In many respects, the financial sector last week all but ceased to function.
In discussions with lawmakers late Sunday, Treasury Secretary Henry Paulson prodded Congress to move forward, voicing worry about how financial markets will react Monday and whether those institutions still standing could be in for more turmoil, officials said. Since unveiling the plan, the administration has kept up pressure for rapid action, in hopes that relieving banks of their troublesome holdings will help lending markets to stabilize.
The bailout is raising thorny questions that could be tough to address as the bill speeds through Congress. Until this proposal, the government’s response to the worst financial crisis in 80 years had been led largely by the Treasury and the Federal Reserve, with Congress consulted often only after the fact. As a result, lawmakers view the bailout plan as a chance to reassert their authority. Many are unnerved by Treasury’s request for a blank check with few conditions.
The proposal has also stirred a populist backlash, with many members of Congress saying the bill needs to be better geared to Main Street than Wall Street.
Another likely area for compromise is aid for homeowners. The administration already believes its plan will provide relief to borrowers even though the specific legislative language doesn’t address the question. Because Treasury will own mortgage-backed securities and actual home loans, Mr. Paulson said on ABC’s “This Week” that the government will be able to exert pressure on mortgage servicers to modify terms.
The debate could expose a peculiar irony in the government’s rescue planning, because taxpayers are now both creditors and debtors in the housing mess. While some taxpayers would benefit from attempts to aid homeowners by modifying mortgages or easing the bankruptcy process, others could be hurt if those moves increase the overall cost of the bailout.