(AP Photo/Lauren Victoria Burke)
WASHINGTON (AP) -- The chairman of the House Financial Services Committee declared Friday that an agreement on legislation to relieve a spreading financial crisis depends on House Republicans "dropping this revolt" against President Bush.
Rep. Barney Frank said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at a White House meeting Thursday, not long after key congressional players of both parties declared they'd achieved the broad outlines of an agreement on a bill implementing the administration's proposed $700 billion bailout plan.
Frank said he did not think that Democrats were going to see a substantially different proposal from the plan the administration has been trying to sell to lawmakers and which had been the focal point of closed-door talks for days. He called the rival proposal being pushed by House conservative Republicans "an ambush plan."
Participants in a meeting late Thursday afternoon that Bush had at the White House with congressional leaders and presidential candidates John McCain and Barack Obama said it descended into arguments. The disagreements were so deep-seated that some lawmakers wondered aloud just who - and how many - negotiators would show up for the resumption of talks later Friday morning at the Capitol.
"I didn't know I was going to be the referee for an internal GOP ideological civil war," Frank, D-Mass., said on CBS's "The Early Show."
Sen. Richard Shelby, an Alabama Republican who appeared on the same show, said many GOP lawmakers dislike the proposal that has been pushed on the administration's behalf principally by Treasury Secretary Henry Paulson.
"Basically, I believe the Paulson proposal is badly structured," Shelby said. "It does nothing basically for the stressed mortgage payer. It does a lot for three or four or five banks . ... "
The political infighting happened even as Washington Mutual Inc., one of the country's largest banks, collapsed under the weight of its bad bets on the mortgage market. The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.
Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.
The White House summit meeting, called principally with the purpose to seal the deal that Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public, descended into arguments.
The meeting revealed that Bush's proposal had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.
Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.
And when Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House's top Republican refused to send a negotiator.
"This is the president's own party," Frank said at the time. "I don't think a president has been repudiated so strongly by the congressional wing of his own party in a long time."
"What we have right now is total chaos brought by injecting presidential politics into very serious negotiations," New Mexico Gov. Bill Richardson said on NBC.
The presence of McCain and Obama at the White House session indeed lent a greater aura of urgency - and personal intensity - to the discussion.
Asked Friday whether an agreement appeared likely by the end of the weekend, Frank said: "It depends on the House Republicans dropping this revolt against the president and cooperating in trying to amend the plan and at this point I can't give you a yes or no because it's up to the House Republicans and their war, I think, on behalf of Sen. McCain, with President Bush."
McCain's leadership in the negotiations "is to try to stop us from yelling at each other, announcing deals that don't exist, to actually talk to the House and the Senate and get agreement and then go to the press," Sen. Lindsey Graham, R-S.C., said on NBC's "Today" show: "Try to create organization out of chaos. Three days ago (Sen.) Harry Reid said there'll be no deal without John McCain's support. Nothing happened for three days. John comes back to town, now he's being criticized for coming back."
House Speaker Nancy Pelosi, asked if a way can be found to an accord any time soon, said that "it will happen because it has to happen. I would hope we could come to agreement within the next 24 hours so we could put the bill in writing and bring it to the floor. That's really up to the House Republicans."
Shelby, however, said he has a letter from some 200 economists saying the plan as structured by Paulson "is a mistake and won't work."
"I say this will not solve the problem," he said on ABC's "Good Morning America.:"
"We're going to spend close to a trillion dollars, we're going to borrow it, I say we can do better," Shelby said.
Republicans and Democrats alike seemed unsure which way McCain was leaning. His campaign's statement late Thursday shed little light.
"At this moment, the plan that has been put forth by the administration does not enjoy the confidence of the American people," it said. It was unclear whether McCain would attend Friday night's scheduled debate against Democratic nominee Barack Obama in Oxford, Miss.
Ordinarily a Republican president's problems are with Democrats, especially if they control the House and Senate. In this case, Bush seemed almost over that hurdle.
To be sure, Democrats demanded a number of changes in his plan, but administration insiders signaled they probably were acceptable. They included greater oversight, more protections for taxpayers, efforts to head off home foreclosures and piecemeal allocations of the federal money to buy toxic mortgage securities.
What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Minority Leader John Boehner's blessing.
Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, R-Wis., a chief sponsor, said it was clear that Bush's plan "was not going to pass the House."
But Democrats said the same was true of the conservatives' plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.
At one point in the White House meeting, according to two officials, McCain voiced support for Ryan's criticisms of the administration's proposal. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan McCain favored.
These officials also said that as tempers flared, Bush struggled at times to maintain control.
At one point, several minutes into the session, Obama said it was time to hear from McCain. According to a Republican who was there, "all he said was, 'I support the principles that House Republicans are fighting for.'"
Some at the table took that to mean the conservatives' alternative proposal, which stands little chance of passage.
A few hours later, Paulson and the handful of negotiators wearily headed for home. Frank told The Associated Press: "I did tell Secretary Paulson that this whole thing is at risk if the president can't get members of his own party to participate."
Associated Press reporters Julie Hirschfeld Davis and David Espo contributed to this report.
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