Sept. 26, 2008 — -- Members of Congress and Treasury Secretary Henry Paulson are expected to return to Capitol Hill this morning to try to revive a $700 billion bailout plan as it became the focus of partisan finger-pointing and attacks on the presidential nominees after a meeting at the White House.
The talks broke down late Thursday night as rebellious House Republicans "took a walk," in the words of House Financial Services chairman Barney Frank, D-Mass.
With the deal in limbo, it was also not clear whether John McCain and Barack Obama would hold their first presidential debate on schedule tonight. The debate is to be held in Oxford, Miss., but McCain has said he won't attend if an agreement is not reached on how to deal with the country's mortgage and credit crisis.
Paulson, Senate negotiators from both parties and a House Democrat emerged from Thursday night's meeting, saying that they had agreed to most, if not all of the points of a fundamental agreement announced earlier in the day, before hopes were dashed at the White House meeting.
Alabama Rep. Spencer Bachus, ranking GOP member of the House Financial Services Committee, came and went several times from the Capitol meeting -- at one point, according to Democrats who emerged, seeking clearance from House Republican Leader John Boehner of Ohio to be deputized to sit at the negotiating table. Such a request apparently was denied, and while Bachus returned to the meeting, he left soon thereafter.
"We're not going to come to a conclusion on a three-legged stool here, missing the fourth leg," said angry Senate Banking Committee chairman Chris Dodd, D-Conn., upon emerging from the meeting.
Another round of meetings of the House and Senate Democrats and Senate Republican negotiators convenes today at 11:30 a.m. ET.
Presidential Politics Enter Bailout Negotiations
Before the Capitol Hill meeting began, House Majority Leader Harry Reid, D-Nev., continued to cast blame on Republicans, and specifically McCain, the Republican presidential nominee.
Reid said McCain was "not helpful" by suspending his campaign and heading to Washington, claiming it was difficult to "understand what John McCain said at the [White House] meeting." He said the Arizona senator spoke last and only for several moments, and did not contribute anything.
"McCain only hurt this process," Reid said.
Asked whether McCain expressed interest in taking part in negotiations on Capitol Hill, Reid said, "No."
Soon after Reid's comments, which followed another blast at McCain by Frank, the McCain campaign suggested Obama, the Democratic presidential nominee, was at fault.
"At today's Cabinet meeting, John McCain did not attack any proposal or endorse any plan," said a statement from the McCain campaign. "John McCain simply urged that for any proposal to enjoy the confidence of the American people, stressing that all sides would have to cooperate and build a bipartisan consensus for a solution that protects taxpayers.
"However, the Democrats allowed Sen. Obama to run their side of the meeting," the statement added. "That did not work as the meeting quickly devolved into a contentious shouting match that did not seek to craft a bipartisan solution."
Pointing Fingers After White House Meeting on Bailout
After the White House meeting, Frank told Democratic colleagues that McCain's sudden heightened involvement in the negotiations -- he announced Wednesday he was suspending his campaign and might skip a scheduled presidential debate with the Illinois senator Friday -- has destroyed the chance of an agreement, sources told ABC's George Stephanopoulos.
Frank compared McCain's involvement to "Richard Nixon blowing up the Vietnam peace talks in 1968."
A senior McCain adviser told ABC News' David Chalian, "It is clear that there is not yet an agreement, but we're working with all parties with the common goal of getting an agreement. When we have an agreement, we'll have a debate."
Other Democrats pointed fingers at House Republicans, who they said were reneging on matters they thought had been settled, such as on the issue of helping homeowners with foreclosures.
House Republicans said Democrats never included them in negotiations and were trying to jam the agreement's "principles" down their throats. And many are concerned about the U.S. government purchasing apparently toxic assets.
Paulson feared the deal was falling apart, sources told Stephanopoulos.
As Democrats met in the White House's Roosevelt Room after the meeting with Bush, Paulson told them, "Please don't blow this up," according to sources.
Sources say Frank was livid, saying, "Don't say that to us after all we've been through!"
House Speaker Nancy Pelosi, D-Calif., reportedly said, "We're not the ones trying to blow this up. It's the House Republicans."
Paulson replied, "I know, I know; it's both sides," according to a Treasury Department spokeswoman.
After the limited participation by House Republicans at the evening Capitol Hill session, Frank said Pelosi won't bring a bill to the House floor unless it has some backing from Republicans in the House.
"Ms. Pelosi will not bring a partisan bill to the floor," said Frank. "She will not say that we're going to have a one-sided Democratic bill that is attacked by the House Republicans in response to a request from George Bush. That's not good for the country."
Dodd and Frank dismissed a late offer by House Republicans that the proposed bailout of financial firms with taxpayer money by purchasing toxic mortgage-backed assets be replaced with a taxpayer-backed insurance program.
Frank said it wouldn't work, and said Paulson didn't believe it would work either.
"Sen. McCain and the president between them ought to get House Republicans to come to the table," said Frank, who disputed a McCain campaign report that the meeting Thursday had devolved into a shouting match.
"No," said Frank. "Some of us were frustrated."
"If he feels that strongly about this, he ought to get on the phone and get the House Republicans to show up," said Dodd of President Bush, who gave a speech to the nation Wednesday night warning of the dangers of inaction.
"When House Republicans don't participate," Dodd said, "the question I'm clearly going to get from my Senate Democrats is: Why are we at the table talking when the president's party represented by the other party refuses to even show up? What are we doing here?"
House Republican Alternative Plan
Meanwhile, a group of House Republicans outlined their own proposal to address the financial crisis. They described it as a mortgage insurance approach, claiming it would make Wall Street pay for its own bailout.
"It was becoming very clear to us that this [administration-backed] bill was not going to pass in the House," said Rep. Paul Ryan, R-Wis. "There was not support among Republicans, and even many Democrats were not going to vote for this bill."
"So what did we do?" he asked. "We rolled up our sleeves, and we tried to come up with a plan that could pass the House. And what we learned was the big problem with this bill was the taxpayers were getting stuck with the tab."
Group members said they want to work with Democrats, describing their plan as the product of a working group put together by Boehner in an effort to find bipartisan support.
The group acknowledged briefing McCain on the plan, but Rep. Eric Cantor, R-Va., said that it was not a product of the McCain campaign and that the GOP presidential nominee had not endorsed it.
The plan is funded by insurance and it requires the government to provide insurance to holders of bad mortgages. Those assets would then have value, supposedly allowing commerce to restart and the markets to begin to work again.
"We understand that there is a problem on Wall Street that can infect Main Street, but Wall Street needs to pay for it," said Rep. Jeb Hensarling, R-Texas. "We hope in the hours and days to come that we have the ability to work with Democrats, that this will be considered."
Things looked much brighter for the main bailout plan earlier in the day.
As the meeting with Bush, congressional leaders and the presidential candidates got under way, staff members of the Senate Banking Committee released an "agreement of principles" to reporters at the White House.
Under the agreement, only $250 billion of the $700 billion would be initially funded and an additional $100 billion would be provided when the treasury secretary asked for it. The final $350 billion could be denied. To do so, Congress would need to make a "joint resolution of disapproval."
The plan would also reduce inappropriate executive compensation for companies that participate. Taxpayers would receive some sort of equity in those companies. And most profits would be directed to pay down the national debt.
The agreement also called for an oversight board that could issue cease and desist orders, regular reports to Congress, a new inspector general to monitor the treasury secretary and General Accounting Office audits of funds.
The plan would require the government to modify mortgages it owns or controls to prevent foreclosures and, where possible, coordinate efforts to modify loans it does not control. Also, a portion of future profits from the plan would be used to fund existing affordable housing programs.
McCain, Obama and top congressional negotiators then met with Bush at the White House to discuss the proposal.
"I want to thank the leaders of the House and the Senate for coming. I appreciate our presidential candidates for being here, as well," Bush said in remarks to the media as he sat beside the leaders before the meeting.
"We are in a serious economic crisis in the country if we don't pass a piece of legislation," Bush said. "I want to thank the spirit of bipartisan cooperation that's taking place here in Washington."
"One thing the American people have to know is that all of us around the table take this issue very seriously and we know we've got to get something done as quickly as possible," Bush said. "And this meeting is an attempt to move the process forward. My hope is that we can reach an agreement very shortly."
Top Republican Lawmaker: 'No Agreement'
But Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to tell reporters he was unhappy with the details.
"It's flawed from the beginning," Shelby said of the "agreement of principles."
Standing outside of the West Wing of the White House, Shelby added, "That agreement is obviously no agreement."
Asked about the tenor of the meeting inside the White House, Shelby said, "Sens. McCain and Obama were being senators. ... They were very courteous of each other and very respectful."
Shelby held up a bundle of papers, saying he has "five pages" of leading economists saying Congress should be considering alternatives to the Paulson plan.
ABC News' Jennifer Parker and Ann Compton contributed to this report.