President Bush, second from right, meets with congressional leaders during a meeting in the Cabinet Room of the White House, Thursday, Sept. 25, 2008, in Washington to discuss the proposed bailout of the financial industry. Seated from left are Republican presidential candidate Sen. John McCain, R-Ariz., Minority Leader Sen. John A. Boehner, R-Ohio, Speaker of the House Rep. Nancy Pelosi, D-Calif., and Senate Majority Leader Sen. Harry Reid, D-Nev (AP Photo/Pablo Martinez Monsivais)
WASHINGTON (AP) -- The Bush administration and Congress anxiously revived negotiations on a $700 billion financial bailout on Friday, one day after the largest bank collapse in U.S. history provided a brutal reminder of the risks of failure.
"There is no disagreement that something substantial must be done," declared President Bush. He urged lawmakers to "rise to the occasion" - and quickly.
In one small sign of progress, House Republicans dispatched their second-ranking leader, Rep. Roy Blunt of Missouri, to join the talks after their objections to an emerging compromise had brought negotiations to a standstill the day before. They also demanded "serious consideration" for a plan of their own, involving less government intrusion and lower cost to the taxpayers than the $700 billion that Treasury Secretary Henry Paulson has been seeking.
The legislation the administration is promoting would allow the government to buy bad mortgages and other sour assets held by investors, most of them financial companies. That should make those companies more inclined to lend and lift a major weight off the national economy that is already sputtering. But a significant number of lawmakers, including many House conservatives, say they're against such heavy federal intervention.
Under their plan, pushed at a White House meeting Thursday by House Minority leader John Boehner, instead of the government buying the distressed securities, it would insure them.
Presidential politics weighed heavily and unpredictably on the election-season effort to stave off a full-blown economic crisis.
After announcing earlier in the week he would suspend his campaign and return to the capital until there was an agreement, Republican John McCain abruptly reversed course and departed for Friday night's debate with Democratic rival Barack Obama in Mississippi.
There were fresh signs of urgency at both the White House and the Capitol, one day after an unusually tempestuous White House meeting and the collapse of Washington Mutual, the largest failure in U.S. banking history. The Seattle-based institution had invested heavily in the now-moribund mortgage market.
Bush made his brief remarks in hopes of projecting calm for the financial markets. And the Dow Jones industrials were up slightly near the end of the trading day.
"We're going to get this done, and stay in session as long as it takes to get it done," Senate Majority Leader Harry Reid, D-Nev., said afterward Bush's statement.
Sen. Judd Gregg, R-N.H., added, "I think anybody who got up this morning and looked at the markets, especially the credit market, had to take a deep breath and say, 'this is serious, we better do something.'"
In days of negotiations, the administration has accepted demands from lawmakers to give Congress considerable authority to oversee the bailout. Additionally, Paulson relented to requests to limit the severance packages that corporate executives can receive from firms benefiting from the government bailout.
Also, rather than provide $700 billion upfront, as Paulson initially requested, Congress would approve $250 billion, with the president able to certify the need for an additional $100 billion on his own authority. The final $350 billion would become available with a second presidential certification, although this time Congress would have authority to block it.
Any compromise is also expected to require the government to obtain partial ownership of any company it invests in.
Democrats, too, signaled they were considering jettisoning some of their own priorities.
Frank indicated they might ultimately drop a requirement that a portion of any profits from the rescue be funneled to a fund to build housing for low-income people. That mandate, deeply unpopular with Republicans, "is not an essential," Frank said.
Additionally, Obama said earlier in the week he hoped Democrats would not press a proposal giving bankruptcy judges the power to ease mortgage terms for homeowners.
Beyond the specifics of any legislation lie political calculations in the shadow of hard-fought presidential and congressional campaigns.
While Democrats control a majority of both the House and Senate, their leaders have made it clear they will not force their rank-and-file to vote without Republican support on a bailout advanced by an unpopular president on an unwilling public.
In an Associated Press-Knowledge Networks poll, only 30 percent of those surveyed expressed support for Bush's package. An additional 45 percent were opposed, with 25 percent undecided. The survey was conducted Sept. 25 and had a margin of error or 3.8 percent. It was conducted over the Internet by Knowledge Networks, which initially contacted people using traditional telephone polling methods and followed with online interviews.
Aides to lawmakers in both parties say telephone calls from constituents are running heavily against the bailout - in some cases nearly 100-1 against, making the vote a potentially tricky one for a candidate in a competitive race.
Ironically, though, many House conservatives who are most opposed to the measure are in safe seats, thus free to resist the daily calls for action - and the warnings from Bush and Federal Reserve Chairman Ben Bernanke that a recession looms without a bailout.
Opposed to direct government purchases of assets, they favor tax breaks and creation of a new government insurance program that would give private companies an incentive to make the purchases on their own.
"Our goal here in attempting to come to an agreement is to do our best to protect American taxpayers," said Republican leader Boehner of Ohio, after a closed-door meeting other GOP lawmakers.
Inside the meeting, Boehner received a standing ovation from fellow Republicans, some of whom expressed anger that Bush and his administration had effectively shut them out of negotiations and tried to force them to support an unpopular bill.
"He got a standing ovation because he stood up to the president and Paulson," said Rep. Ray LaHood, R-Ill. "Now we're a part of the game."
Said Boehner, speaking of a White House meeting on Wednesday: "If they thought they were rolling me, they were kidding themselves."
Frank saw it differently. "I didn't know I was going to be the referee for an internal GOP ideological civil war," the Massachusetts Democrat said on CBS' "The Early Show."