Despite all the constraints Congress supposedly wrapped around him, Treasury Secretary Henry M. Paulson is about to become the most powerful mortgage financier of the modern era -- most likely of any era.
Buried beneath the 100-plus pages of detail that Paulson's financial rescue plan has picked up during its 10-day journey from a Bush administration wish list to a bipartisan congressional compromise is the striking fact that the Treasury secretary got almost everything he sought -- an eventual $700 billion and the authority to spend it largely as he sees fit.
To be sure, congressional bargainers did make one huge change.
And in the process, they created a potential stumbling block as the Treasury tries to stabilize the deeply damaged financial system by acquiring toxic mortgage-backed securities.
Under terms of the compromise announced Sunday, any firm selling troubled assets to the government would have to give Washington the right to take an ownership stake in the firm -- a more sweeping requirement than had been expected. While the aim is to let taxpayers profit when the financial system eventually recovers, administration officials worry that generally healthy companies may be discouraged from getting involved -- thereby reducing the effectiveness of the rescue effort.
Whether that turns out to be a big problem remains to be seen, however, and for the rest, Paulson's new powers will be almost breathtaking in their scope.
He and his successor will have the right to buy not just mortgage-related securities at the heart of the crisis, according to the language of the bill, but under some conditions could buy any financial instrument "the purchase of which is necessary to promote financial market stability."
Moreover, the legislation encourages him -- in fact, requires him -- to combat the nationwide wave of home foreclosures by pushing mortgage service companies to rewrite some loans and to cut the interest rates or even the principal for financially strapped homeowners.
It even gives him the politically explosive power to cut deals with foreign, not just U.S., banks in some cases.
"This is unquestionably the biggest bailout in American history," said Wesleyan University economist Richard S. Grossman, a scholar of financial crises. "I'm as nervous as everybody else about Paulson having all this power, but who else are you going to give it to?
"This isn't something that can be done by committee," he said.
Congressional leaders sought to drive home the idea that they have added so many protections to the original 2 1/2 -page blueprint Paulson sent to Capitol Hill on Sept. 20 that the final plan is no longer an undeserved sop to a mismanaged financial industry. Instead, proponents say, it now represents ordinary Americans' best bet for preserving their savings, jobs and economic well-being.
And indeed, the compromise language of what's now called the Emergency Economic Stabilization Act does include huge changes from Treasury's original proposal.
Among them: breaking the $700 billion into three installments, with only the first $350 billion quickly available; establishing no fewer than four oversight bodies to keep an eye on the Treasury secretary; and the addition of a limited right for people to sue over the program -- something Paulson initially sought to prohibit.
"This is not about a bailout of Wall Street," declared House Speaker Nancy Pelosi (D-San Francisco). "It's a 'buy-in' so we can turn our economy around."
"This is about Main Street. It's about America. It's really about the fabric of American life," echoed Sen. Judd Gregg (R-N.H.), the ranking GOP member of the Senate Budge Committee.
Despite all of the added protections, a late Sunday draft of the measure was replete with delegations of all sorts of powers to Paulson, even in areas where lawmakers said they had made their biggest mark.
For example, in setting up the measure's centerpiece -- its "troubled asset relief program" -- Paulson "is authorized to take such actions as the secretary deems necessary" to carry out the effort, including hiring, contracting and assigning companies to act as agents of the government, as well as buying, holding and selling assets.
Or again, in splitting up the $700 billion, the measure makes the first $250 billion immediately available and simply requires President Bush or his successor to declare that additional sums are needed in order to get the next $100 billion. When it comes to the final $350 billion, it doesn't require congressional approval, but instead gives lawmakers 15 days to vote their disapproval or the money starts flowing.
Still another example: House Republicans nearly derailed the whole effort late last week, claiming they had uncovered a cheaper alternative, a plan to have Washington offer companies a kind of insurance for their troubled mortgage-backed securities. By Sunday night, proponents of the scheme were saying that they had scored a major victory.
"My colleagues are much happier with this bill now," said Rep. James T. Walsh (R-N.Y.). "The insurance proposal is very popular."
But while the compromise requires Paulson to set up such an insurance program, it goes out of its way to avoid requiring him to use it, saying only that the Treasury secretary "may develop guarantees of troubled assets and the associated premiums."
Treasury officials and many independent analysts have expressed deep skepticism that the insurance program could save Washington any money unless it set a price for coverage that was so high no one could afford it. "Normally you buy insurance before something bad happens," said Brookings Institution economist Douglas Elmendorf. "You can't really buy afterward."
House and Senate Democrats will likely see some of their own most cherished provisions treated much like the insurance measure -- with Paulson deciding how to handle them.
For example, while Democratic lawmakers declared that the final bill would ban companies selling troubled assets to the government from giving their executives multimillion-dollar salaries and "golden parachute" severance packages, Treasury officials briefing reporters on background late Sunday said the actual provisions were extraordinarily narrow.
The ban would generally apply only to severance packages, not salaries, and then only to packages negotiated in the future, not ones already in place. In addition, the bans would only affect companies that sell large blocks of assets to Washington, and only when the executive is fired or the company had gone bust.
"We want to encourage all institutions, including healthy institutions, to participate" in the program, said one of the Treasury briefers. "We're not abrogating existing [compensation] contracts."
A similar fate almost certainly awaits Democrat-drafted provisions to have the Treasury help financially stretched homeowners by jawboning mortgage servicers into renegotiating their mortgages.
The measure requires Paulson to "maximize assistance for homeowners . . . and minimize foreclosures." But in the very same sentence, it says the Treasury has to make sure that taxpayers are not stuck with any additional costs, which makes any substantial additional aid to homeowners unlikely.
Even before unveiling the original plan, Paulson exercised sweeping influence over the nation's mortgage market, having orchestrated the government's Sept. 7 seizure of Fannie Mae and Freddie Mac, which between them owned or guaranteed nearly half of the mortgages in the U.S.
If the compromise measure is approved, the Treasury secretary will extend the government's reach into the one area of housing finance where it has thus far tread only lightly, the market for the kind of exotic financial instruments that Wall Street built atop the once-simple mortgage.
No company or other government agency would have anything close to so large a portfolio of mortgages and mortgage-related securities -- and none ever has in American history.
While House and Senate leaders of both parties confidently predicted swift approval of the compromise measure Sunday, rank-and-file lawmakers were not quite as sure of the final outcome.
"I think it's up in the air," said Rep. Christopher Shays (R-Conn.), who described himself as a "lean 'yes,' but not a committed 'yes.' "
He and many other lawmakers fear the political backlash if the plan doesn't work and financial markets continue to spiral downward.
"This is a legacy vote; these are the votes you have to live with for the rest of your life," Shays said.