Congressional negotiators and the White House reached a tentative agreement this morning on a $700-billion Wall Street bailout, acting with urgency to complete a deal to shore up the economy before financial markets open Monday.
Party leaders still need to present the agreement to their rank and file, but with leaders of both parties appearing together after marathon talks, the agreement stands a good chance of passing Congress and getting President Bush's signature within a few days.
"We've made great progress," House Speaker Nancy Pelosi (D-San Francisco) said. "We have to commit it to paper so we can formally agree."
The rescue plan, which grew from a three-page proposal sent to Capitol Hill by the Treasury secretary a week ago to more than 100 pages, would allow the federal government to purchase bad debts from ailing financial institutions in an effort to stave off more bankruptcies and provide cash for new loans to ease the credit market freeze-up.
While negotiators did not provide details of the agreement, the plan is expected to call for the money to be made available in installments instead of one enormous lump sum. It is also expected to include additional oversight of the government's spending, limits on the pay of executives of firms that receive government aid, help for homeowners at risk of foreclosure and a provision that taxpayers share in any profits from the sale of distressed assets.
A House GOP leadership aide said the agreement included an insurance program sought by Republicans under which financial institutions would pay premiums to help pay for bailing out less solvent companies.
Democrats have noted that Paulson considered such an approach unworkable because many firms are short of cash. One Democratic staffer likened the GOP insurance proposal to buying homeowners' insurance on a house that is already on fire.
The concession was, nonetheless, important because Democrats are unwilling to back the controversial plan without Republican support.
Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in an interview that lawmakers want to see on paper "what we believe we have agreed to."
But, he noted, "You wouldn't have had that scene there, believe me, if there had been any outstanding issue that we hadn't felt as though we had resolved" -- a reference to the bipartisan gathering before the TV cameras after the long negotiating session.
House Minority Leader Roy Blunt (R-Mo.) said he would present the proposed agreement to his rank and file members, who had been the loudest critics of the plan.
The House and Senate could vote on the proposal as early as Monday.
White House spokesman Tony Fratto said early this morning, "We're pleased with the progress tonight and appreciate the bipartisan effort to stabilize our financial markets and protect our economy."
Even with a few hitches, negotiators reached agreement with unusual speed for Congress, coming together just nine days after Paulson and Federal Reserve Chairman Ben S. Bernanke came to Capitol Hill to warn about dire consequences for the economy if lawmakers failed to act.
While some lawmakers argued against Congress setting an artificial timetable, Sen. Robert F. Bennett (R-Utah) warned Saturday that delay would be deadly.
"What will they say come Monday if another major bank fails?" he said. )"What will they say Monday if the international markets refuse to buy any American paper? One of the reasons you cry wolf is because there is a wolf actually at the sheepfold."
As negotiators considered the Wall Street bailout, Congress on Saturday sent to Bush a spending measure that includes a $25-billion loan program for another distressed segment of the U.S. economy -- the auto industry.
"This is an important first step to providing access to capital for important investments in the future at a time when the capital markets are distressed," Ford Motor Co. said in a statement.
The loan program is designed to help the companies speed up production of more fuel-efficient vehicles.
It was included in a stopgap funding bill needed to keep the government running beyond the end of the fiscal year -- Sept. 30 -- into early next year after a new president takes office.
It was approved by the Senate 78-12, following House approval earlier in the week.
The measure does not include an extension of the long-standing ban on new oil drilling off much of the U.S. coast. The ban is set to expire Tuesday night, but supporters hope to renew all or part of it next year.
As negotiators worked on the Wall Street rescue plan, they stepped up their efforts to portray it as equally important to Main Street as it is to Wall Street in an effort to win greater public support and ease the political anxiety of reelection-minded lawmakers, who are weighing whether to support it.
"If it were possible to let every irresponsible firm on Wall Street fail without affecting you and your family, I would do it," Bush said in his weekly radio address.
"The failure of the financial system would mean financial hardship for many of you."
House Republicans, who have been critical of the growth in government spending under Bush, have been pushing to reduce the cost of the bailout. Unlike the president, they must stand for reelection this fall, and are willing to break with Bush as they try to reclaim the mantle of fiscal responsibility.
But Bush in his radio address said that the cost would be "far less" than $700 billion. "Many of the assets the government would buy are likely to go up in price over time," he said. "This means that the government will be able to recoup much, if not all, of the original expenditure."
Sen. Judd Gregg of New Hampshire, the Senate Republican's lead negotiator, called the plan a "market stabilization plan."
"We can't underestimate the threat we face relative to the fiscal melt down and the impact it will have on Main Street," he said in a statement. "This is about people's jobs, it's about people's savings, it's about people's ability to participate in commerce, to send their kids to school, and to be able to borrow money to run their small businesses. So action is critical, we have to take it promptly, and the Congress is responding."