After a dramatic weekend filled with negotiations and discussions, lawmakers managed to achieve their goal of reaching a compromise on the $700 billion bailout package before the markets open today. The House is scheduled to vote on the 110-page bill today with a Senate vote to follow as early as Wednesday. “All sides had to surrender something” in order to reach a deal, notes the New York Times. Still, their work is hardly over as “weary negotiators said that the hardest part is still before them” because congressional leaders now have to step up their efforts to get support for the measure, notes USA Today. Despite the compromises, the basic outline of the rescue package remains the same, as it would “effectively nationalize an array of mortgages and securities backed by them,” the Wall Street Journal summarizes.
Despite signs that some who opposed the bailout plan last week are now ready to support this new version, the deal still “faces strong opposition, and it remained unclear Sunday whether it would have enough votes to pass,” says the Los Angeles Times. The WSJ is a bit more optimistic and says that approval is seen as likely “despite the measure’s unpopularity.” Both presidential candidates offered tepid endorsements. (The Washington Post’s Web site appeared to be down this morning.)
The NYT details how the weekend’s marathon negotiating sessions were filled with tense moments and included lots of shouting back and forth between lawmakers and administration officials. At one point early Sunday morning, it seemed as if Treasury Secretary Henry Paulson was on the verge of collapse. “He was tired, but fine,” reports the NYT.
So, what’s in this deal that would, as the WSJ puts it, “authorize the biggest banking rescue in U.S. history”? Many of the details remain murky, but most of the basic items shouldn’t come as a surprise to anyone who has been following the negotiations over the past week. Lawmakers added stronger oversight to the plan, which would impose some limits on executive compensation and also require companies that benefit to provide an equity stake to the government so taxpayers can get some money back if it recovers. The bill also calls on the government to do more to help homeowners avoid foreclosure.
Besides the equity stake, the compromise plan also includes a measure that would require the president to assess whether the bailout has cost taxpayers money after five years. If it has, then the president must submit a plan to Congress that would force financial firms to pay up to make up for the difference. “This is a major, major change,” House Speaker Nancy Pelosi said last night.
The bill would distribute the money in installments, starting with $250 billion plus $100 billion that could be released by the president as he sees fit. The other $350 billion would be handed out if the president approves and if there are no objections from Congress. If the bill passes, the Treasury would have 45 days to outline how the government would decide what to buy and how much to pay for it. It’s clear, though, that the Treasury secretary would have much flexibility and wouldn’t be limited just to buying up mortgages and mortgage-backed securities.
The measure that would have the government insure the toxic debt rather than simply buy it—which was what House Republicans proposed last week, when they threatened to back away from the deal—”ultimately survived in limited form,” notes the WSJ. The proposal is included in the bill, but it is listed along with the power to purchase the securities so it’s unclear whether the Treasury would actually use it.
Much of the discussion this weekend centered on the limits to executive compensation, which seemed to be a done deal last week. Some key Democrats were pushing for a one-size-fits-all approach, but Paulson strongly objected. They finally agreed on a tiered measure that particularly focuses on preventing “golden parachute” payouts to executives but is rather narrow overall and sets complicated limits, depending on how each firm participates in the deal. In the end, the limits on executive pay “appear unlikely to be used very often,” says the NYT.
If there’s one clear winner from this compromise plan, it’s clearly Paulson, the LAT and NYT both point out in nearly identical analyses. Despite all the wheeling and dealing over the past week, Paulson got almost everything he wanted, and if the plan is approved, he and his successor would have a great deal of power over the U.S. economy. “Paulson’s new powers will be almost breathtaking in their scope,” declares the LAT. “Rarely if ever has one man had such broad authority to spend government money as he sees fit,” notes the NYT. To be sure, lawmakers did increase oversight and added the equity stake provision that Paulson didn’t like. But ultimately, if there’s one striking thing about the compromise, it’s the great latitude that Paulson would have in deciding how to implement its details.
“The $700 billion question: Will it work?” asks USATbefore outlining the pros and cons. That’s the key question as lawmakers move to approve a deal that is likely to change the face of the American economy for decades to come. Even if the plan works beautifully and manages to shore up the credit markets, “it is unlikely to prevent the economy from sliding into recession,” notes the WSJ. (Of course, many think the U.S. economy is already in a recession.) “There will be some benefits of this plan, but we think the economy’s already gone too far to prevent enough damage,” an economist tells the WSJ. The NYT suggests that it’s best to see the bailout as a very significant step that will leave lots of unfinished business to the next administration. “Managing this issue is going to dominate the agenda of the next president for two years,” one expert said.
In an analysis piece inside, the NYT says that the fight over the bailout plan has probably provided voters the best view of how each of the presidential candidates would approach problems if elected. John McCain showed once again that he believes “individual leaders can play a catalytic role and should use the bully pulpit to push politicians.” For his part, Barack Obama demonstrated how he believes that “several minds are better than one” and showed that “he is wary of too much showmanship.” While some say that Obama may have acted too calm and was slow to react, McCain is the one who comes out of this with more mixed reviews from members of his own party. Some insist McCain showed leadership, but others say he created a lot of chaos and drama without achieving any tangible benefits for his campaign.
In a Page One piece, the LAT says that McCain’s actions not only upset supporters, but also “gave new ammunition” to those who have been raising questions about his judgment. “It was all very dramatic, but maybe the American public is tired of drama after the last eight years,” said John Weaver, McCain’s former campaign manager. By pushing so hard for a deal, McCain also managed to alienate some of the more conservative members of his party, who warmed up to him only after he selected Gov. Sarah Palin as his running mate.
Meanwhile, there are no indications that McCain’s attempts to suspend his campaign and delay Friday’s debate helped him with voters. USAT and the LAT both publish polls that suggest voters were more impressed by Obama than McCain during the face-off in Mississippi. USAT reports that debate viewers gave Obama a 17-percentage-point lead as the candidate with the best ideas to solve the country’s problems. They also said Obama did better in the debate, 46 percent to 34 percent. The LAT points out that while more people still see McCain as more knowledgeable, Obama was seen as more “presidential” by 46 percent of debate watchers, compared with 33 percent who picked McCain. Obama was also seen as more trustworthy and had a clear advantage as the candidate who “cares about people like you.”
In the LAT’s op-ed page, Douglas Schoen says that perhaps it’s time we start paying a bit of attention to candidates who aren’t named McCain or Obama. Polls already show a bit of support for third-party candidates in key states. And in a close election, a bit of support is all they need to change the outcome. As the election draws near, “it’s not the biggest poll percentages that demand scrutiny, but the smallest ones,” writes Schoen. “Because it could turn out that the crucial role in the 2008 election will be played by a candidate no one is talking about.”