President Bush joined key supporters of a Wall Street bailout package today, prodding lawmakers to approve the plan, hours ahead of a difficult House vote expected later in the day. The Senate could take it up later this week.
By all accounts it was a tough weekend for lawmakers who crafted the legislation.
Late Sunday afternoon, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid held a news conference with Senate Banking Committee chairman Chris Dodd to announce that Congress would vote quickly on the legislation.
Earlier the Democratic Chairman of the House Financial Services Committee, Barney Frank, said the House would "definitely" begin debate Monday on the rescue package. A House vote could follow the same day, with the Senate possibly voting by mid-week.
"Inaction would paralyze our economy," Reid said. Dodd, who has been heavily involved in the rescue negotiations, praised Republican leaders, saying that "this was a collaborative effort."
Democrats agreed to the deal after accepting compromises demanded by some conservative Republicans and moderate Democrats.
"This agreement, while not perfect, will help stabilize the economy," Reid, D.-Nev., said in the news conference Sunday.
Late Sunday, even the House Republicans, who had balked at earlier proposals, seemed to indicate they were coming around. Democrats also hope that, after the compromises, enough House Republicans will vote for the package to give Democrats political cover.
"I'm encouraging every member of our conference -- if their conscience will allow them to -- to support this bill," said House Minority Leader John Boehner, R-Ohio.
The Bush administration has pushed for quick passage of the relief bill. Administration officials and congressional leaders hope the deal will boost investor confidence and lead to a sharp uptick in the financial markets Monday.
"This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown," Bush said in a statement. "Many Members of Congress contributed important ideas to improve the legislation my administration proposed. I appreciate the negotiators considering those ideas and incorporating them in this agreement."
Features of Compromise
Besides purchasing troubled assets such as mortgages, the current agreement would require the government to offer insurance -- at a cost to the Wall Street companies -- on some home loans instead of buying them. In effect, the government would guarantee some bad debts without having to fork over taxpayer money immediately.
Treasury officials would not speculate as to what would happen if no company wanted to participate, though they did acknowledge some institutions may ask to have Treasury buy their assets, others may opt for insurance and some may do both.
The legislation currently on the table states that after five years, the president -- whoever he or she may be -- will be required to submit to Congress a proposal to recover from the financial industry any losses taxpayers may have sustained in the bailout.
Congress acknowledged that recovering losses from hard-pressed companies could prove difficult.
The bulk of the bailout remains the government putting up staggering, unprecedented amounts of money to buy bad debts, many of them mortgages.
But party leaders said the $700 billion figure is misleading, because the government should eventually be able to sell many of the debts it purchases. Under the most optimistic scenario, the government could even make a profit.
"Nobody believes that's going to be the final cost," said House Majority Leader Steny Hoyer, D-Md.
Another feature of the current agreement limits the initial disbursement of taxpayer money. About $250 billion -- less than half of the overall amount -- would be approved immediately.
The Treasury secretary would be able to approve another $100 billion without additional congressional consent. The remaining $350 billon would require later approval by Congress.
A congressional oversight panel will be created to keep an eye on how the money is being used.
The bailout plan will place some limits -- in the form of higher taxes -- to companies that end up selling the tainted assets to the government. Only companies that sell $300 million or more in assets would be affected.
First, any stock options or severance packages would not be taxed at the normal personal income tax rate. Instead executives would face an additional 20 percent tax on such payouts.
Companies would also lose part of an existing tax break: Instead of being able to deduct up to $1 million each for the top five executives in the company as part of payroll taxes, they could deduct up to $500,000 each for the 5 top executives.
For companies that the government buys a large stake in, such as insurer AIG which taxpayers now own 80 percent of, there would be no executive payout. The executives at such companies are likely to be dismissed without a golden parachute.
"The era of golden parachutes for high-flying Wall Streeters is over," said Pelosi, D.-Calif.
But under the deal, the government will not break existing executive compensation contracts. The only changes would come to contacts going forward, according to senior Treasury officials.
"If the institution selling the assets meets the asset test [selling more than $300 million] then they're not allowed to enter into any new contracts with their top five executives that allow for a golden parachute payment in the event of -- and only in the event of -- involuntary termination, bankruptcy, insolvency or receivership. Our chief focus is that we do not want to reward poor performance," said one Treasury official. "If an executive, a senior executive at a company and the company is failing, we do not believe they should be getting big bonuses or really attractive contracts coming out of that."
"Those are contractual obligations between the companies and their employees. This is on a go-forward basis," the offical added."
The Political Fight
Many on Capitol Hill were stunned earlier this week to learn that despite the seriousness of the financial crisis, many Americans have grave doubts about the massive bailout.
Taxpayers were especially angered that Wall Street executives and other financial leaders might get huge handouts even though, as viewed from Main Street, they were largely responsible for the crisis.
The package that Congress may vote on this week would put "reasonable" limits on severance packages for executives from companies that are rescued by the government. Both presidential candidates, John McCain and Barack Obama, have insisted that those executives not get "golden parachutes."
Negotiations have been difficult. "We have all had enough of each other," Reid said Sunday.
Earlier this weekend at the Capitol, Sen. Max Baucus, D-Mont., reportedly yelled at Treasury Secretary Henry Paulson during an exchange over how much executive pay should be capped.
It is still unclear how much and whether the deal will boost the markets and the economy. It is equally unclear whether McCain or Obama will benefit.
McCain took the more aggressive stance, announcing that he would "suspend" his campaign and inserting himself into the negotiations. Some Republicans say he was a factor in convincing House Republicans to accept the deal, while Democrats said he had been unhelpful or even harmful.
When McCain appeared on ABC's "This Week" Sunday morning, George Stephanopoulos noted that Frank had accused him of scuttling a deal earlier in the week.
McCain said the earlier agreement "wasn't as good as the one we have now."
As for the Democrats' claim that he was a hindrance, McCain said, "I won't claim a bit of credit, OK, if that makes them feel better. But I'm going to be there working and trying to help solve the crisis."
Obama, appearing on CBS's "Face the Nation," was asked whether McCain should receive credit.
"No," he responded, and then tried to take some of the credit himself.
"For two weeks, I was on the phone every day with Secretary Paulson and the congressional leaders, making sure that the principles that have ultimately been adopted were incorporated into the bill."
ABC News' Jake Tapper and the Associated Press contributed to this report.