Congress Makes Breakthrough on Bailout Plan

After a grueling series of talks that went past midnight, "we're at a point where I think we can say something positive to the American people," said Senator Chris Dodd, a Connecticut Democrat and chairman of the Banking Committee. "This is an important moment."

Senate majority leader Harry Reid, Democrat of Nevada, said that after an "extremely difficult" process, lawmakers and Treasury Secretary Henry Paulson anticipated announcing the details of a deal sometime today.

"We began with a very important task, a task to stabilize the markets, to protect all Americans," Paulson said, flanked by House Speaker Nancy Pelosi, Democrat of California, and other exhausted lawmakers who brokered the package. Paulson said the pending deal - which negotiators did not detail - would be effective for the marketplace and would "work for all Americans."

"I think we're there," Paulson said.

CNN quoted White House spokesman Tony Fratto last night as saying that President Bush was "very pleased with the progress made" in the bailout discussions. Fratto also said that Bush had spoken directly with Pelosi, according to CNN.

The emerging document is expected to provide up to $700 billion for the government to buy mortgage-backed securities and other bad debts that are driving the current mortgage crisis.

Lawmakers in both parties said staffers would work all night inking the final details of the bill, and would present the package to rank-and-file legislators soon afterward. Pelosi and Reid did not indicate when a vote would be held on the package, but both had said earlier that they wanted a deal in principle before tonight, when Asian financial markets open.

House conservatives pushed hard to replace the bailout deal with a government insurance plan, but that idea was rejected by the White House and other negotiators, who said it would not free up frozen credit markets that are making it difficult for Americans to get loans for cars, homes, and college tuition. The insurance idea was likely to end up as a piece of the package, but not a replacement for the bailout, according to staff members and lawmakers close to the negotiations.

"This was never going to be a solution that was going to make everyone happy," said House Financial Services Committee chairman Barney Frank, a Newton Democrat and a key negotiator. But "no solution to a problem can be more elegant than the problem itself."

The pending deal - already controversial among voters unhappy with the idea of using taxpayer money to rescue big businesses - hit a snag last week after House conservatives, eager to return the Republican Party back to its fiscally conservative roots, balked at the $700 billion price tag.

GOP presidential nominee John McCain, while not publicly endorsing the conservatives' alternative plan, won accolades from House Republicans by flying back to Washington and arranging a White House meeting on the matter. But the conservative backlash also exposed long-simmering fissures that threaten the GOP unity McCain needs to win in November, according to political specialists.

As McCain courts the right wing of the party - as he did last week by arranging the White House meeting in which conservatives vented their anger about the emerging deal - he risks undermining his appeal as a rogue Republican willing to defy party leaders on key issues, they said.

"He's sort of trying to have a little bit of both sides of the Republican spectrum," said Lee Miringoff, director of the nonpartisan Marist Institute for Public Opinion in Poughkeepsie, N.Y. "He's never been a champion of that [conservative] side of the party, and yet he needs a red base in November. He's being very careful [about committing] to any sort of bailout, and that doesn't do a lot right now for independents and moderates. He's got a very fine line to walk."

McCain has never won the complete trust of party conservatives, who still resent his authorship of a campaign finance law that controlled campaign advertising, as well as McCain's onetime support for overhauling immigration laws. McCain, however, wore their distaste as a badge of honor, frequently quipping - as he did in the presidential debate Friday night - that he would never win the "Miss Congeniality" award in the Senate.

Selecting Governor Sarah Palin of Alaska, who has strong antiabortion credentials, as his running mate helped McCain appease social conservatives, analysts say. But now that fiscal conservatives have reasserted their power, party divisions are emerging again, and McCain again finds himself in the politically difficult position of placating both conservatives and moderates, this time with Election Day looming.

"The last thing you need, five weeks before an election, is to have to try to bring the party together," said Peter Fenn, a Democratic consultant in Washington.

For most of his two terms, House Republicans have been dependable allies for Bush, helping him score big legislative victories, but fiscal conservatives among them have grown more resentful of White House demands that they believe have undermined the party's core principles. Many are still furious over the arm-twisting the administration did to get their votes on a massive Medicare prescription drug benefit bill in 2003.

Fiscal conservatives said they now feel their party is rushing to rescue big companies that should take responsibility for their own business failures.

Representative Zach Wamp, Republican of Tennessee, said the GOP caucus was angry that Paulson was asking fellow Republicans to vote quickly on an idea that is "wildly unpopular" with voters. Many lawmakers said the response from their constituents was running overwhelmingly against the bailout idea, although opposition has eased in the past few days, they said.

Source: Boston Globe