Pelosi: Bailout means 'party is over' on Wall Street

BySue Kirchhoff and Douglas Stanglin, USA TODAY
September 28, 2008, 6:46 PM

WASHINGTON -- House Speaker Nancy Pelosi said Sunday that the House will vote on a new $700 billion financial bailout bill on Monday to send a message to Wall Street that "the party is over."

The California Democrat said the final language of the bill, which was agreed upon after marathon negotiations over the weekend, was put on the Internet for the public to see (financialservices.house.gov).

She appeared confident that it would get enough votes to pass, but a critical factor was whether conservative House Republicans, who had objected to an earlier draft, would sign on. The GOP members were meeting Sunday to work out their response.

Pelosi said the final sticking points of reaching an agreement had involved strong resistance from the Bush administration over limiting the size of "golden parachutes," or excessive compensation for executives of the troubled financial institutions.

She told reporters that the bill is not a Wall Street bailout, but a "buy-in" to help the economy get turned around.

"Working in a bipartisan way, we sent a message to Wall Street: The party is over," Pelosi said. "The era of golden parachutes for high-flying Wall Street operators is over. No longer will the American taxpayer bail out the recklessness of Wall Street."

The plan would allow the Treasury Department to buy troubled mortgage-backed securities and other loans held by financial institutions. The government could later resell the assets, presumably after they'd recovered much of their value.

Pelosi said she hoped to get the bill to the floor for a vote on Monday. Senate Majority Leader Harry Reid, D-Nev., said it would likely reach the Senate for a vote on Wednesday.

"This has been a bipartisan approach," Reid said. "Now we have to get the votes."

President Bush, in a statement, said that without the rescue plan "the cost to the American economy could be disastrous."

"This is a difficult vote, but with the improvements made to the bill I am confident Congress will do what is best for our economy by approving this legislation promptly," the president said.

Rep. Barney Frank, D-Mass., a key negotiator as chairman of the Financial Services committee, said that it was critical that the bill pass as soon as possible.

"If we do not act, a bad situation will become worse, and that's why we are determined to get this bill through," Frank told reporters.

Another key player, Sen. Judd Gregg, of New Hampshire, the chief Senate Republican in the talks, said getting the bill passed "is absolutely critical to the confidence of the markets."

"If we don't pass it we shouldn't be a Congress," he said. "The option of not passing it is not acceptable relative to our responsibility to the American people."

A bipartisan coalition including Pelosi, Reid, Republican Whip Roy Blunt, and Treasury Secretary Henry Paulson announced the tentative agreement after midnight in the Capitol.

The two presidential candidates, Sen. John McCain and Sen. Barack Obama, indicated they would likely support the final draft.

Obama said Sunday that bailing out financial companies is necessary to keep the economy from crumbling further and taking more American workers down with it.

"My inclination is to support it because I think Main Street is now at stake," the Democratic senator said on CBS' Face the Nation.

McCain likewise said he expects to support the rescue deal as presented early Sunday.

"This is something all of us will swallow hard and go forward with," McCain said on ABC'sThis Week. "The option of doing nothing is simply not an acceptable option."

The proposal is designed to restore market confidence, set a floor under asset prices and allow bank capital and credit to flow again, unlocking critical gears of lending for the economy.

The compromise plan will keep the basic Treasury Department framework. But the Bush administration would get only the first $250 billion of the money up front; then the president could request another $100 billion. The final $350 billion could be cleared by a further act of Congress.

The legislation would place "reasonable" limits on severance for executives of companies that benefit from the rescue plan, said a senior administration official who was authorized to speak only on background. It would affect fired executives of financial firms, and executives of firms that go bankrupt. Some of the provisions would be retroactive and some prospective, the official said.

To ensure taxpayers share in any profits from the program, the deal will let the government take an equity share in the firms it assists. The plan also includes oversight boards and regular reporting by Treasury .

The government would also use its increased presence in the mortgage market to try to restructure troubled mortgages and help homeowners facing foreclosure.

A group of conservative House Republicans had been pushing negotiators to include their alternative plan to have the govenrment insure mortgage assets, rather than buying them outright.

The insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout.

But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make enough credit available. The department would decide how to structure the insurance provisions, said Conrad.

"Democrats could say (in every bill that comes up ) 'everything the Republicans want to do, we'll do as an option,' " said Rep. Jeb Hensarling, R-Tex, before the final deal was announced. "Is it reality or is it window dressing?"

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