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The Bush administrations forceful lobbying effort failed Tuesday to win support from rank-and-file Republicans or Democrats for a $700 billion Wall Street bailout package, though GOP and Democratic leaders still planned to move a bipartisan bill by the end of the week.
The administration deployed Vice President Dick Cheney and Office of Management and Budget Director Jim Nussle to appeal to restive House Republicans, but rank-and-file Members arent embracing it. And Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke faced deep skepticism from the Senate Banking, Housing and Urban Affairs Committee, despite warning that failure to act promptly could provoke a steep recession sparked by frozen credit markets.
The rank and file in both parties expressed deep concerns about anything resembling the $700 billion that the White House wants, and leaders struggled to keep their Members open-minded in the face of surging outside opposition from a diverse range of voices from former Speaker Newt Gingrich (R-Ga.) and the Club for Growth on the right to liberal bloggers on the left.
The dynamic had GOP and Democratic leaders hunkered down and in the same boat they all support moving forward quickly but are being pulled in opposite directions by their rank and file.
Senate Majority Leader Harry Reid (D-Nev.) referenced what he called the disarray among House Republicans and indicated that he saw a similar situation developing in the Senate. Reid said Democrats on the Senate Banking Committee were not confident that more than one Republican would vote to support the plan.
We need some Republican votes, and theyve got to start lining those up, Reid said. He hinted that uncertainty over Republican presidential nominee Sen. John McCains (Ariz.) position on the issue was causing problems in shoring up GOP support.
We need the Republican nominee for president to let us know where he stands on what we should do, he said.
Reid said he was committed to staying in session beyond this Friday if that would result in a bipartisan consensus.
Were going to finish this at the right time, not some arbitrary date, Reid said. However, Senate Democratic aides indicated that the majority was looking to finish all of its work before the start of the Rosh Hashana, which begins at sundown Monday.
Despite Reids remarks, Republican leaders said they broadly agree on an economic response, and Senate Minority Leader Mitch McConnell (R-Ky.) announced that his Conference is largely in favor of limiting the compensation of CEOs whose companies avail themselves of a government bailout a proposal Democrats first floated.
Were anxious to act, and to act quickly, to restore confidence in the markets and in our country, McConnell said.
But several GOP Senators acknowledged that Republicans are having a hard time getting comfortable with what has been called the largest bailout in history.
This is the last thing anybody wants to do. If we do it, its because it has to be done. This isnt Republican philosophy being advanced. This is solving an emergency problem, Senate Minority Whip Jon Kyl (R-Ariz.) said.
Senate Republicans sought to turn the debate around from one about a taxpayer-financed bailout for Wall Street to one of market stabilization that would benefit average Americans seeking small business or car loans.
Whats important to remember here is that if we dont take this type of stabilizing action, the cost to the taxpayer in lost jobs, lost savings, lost opportunity, is huge, Budget ranking member Judd Gregg (R-N.H.) said.
Democrats werent immune from divisions as well. Senate Banking Chairman Chris Dodd (D-Conn.) reiterated his concern that House Financial Services Chairman Barney Frank (D-Mass.) was making a deal with the White House without Senate input.
You cant go off on this one side doing something that the other side doesnt know about, Dodd said.
But when asked why he wasnt present in the room with Paulson and Frank, Dodd said it was because of the nature of the institutions. Pressed further about why he didnt insist on being in the room, Dodd said, Were not going to get into that.
But some Senate Democrats said they felt Paulson was finally willing to make a deal on the package, after hearing from him and Bernanke earlier in the day.
Sen. Charles Schumer (D-N.Y.) said he was heartened that Paulson and Bernanke reacted favorably to his suggestion that the industry pay into a fund that would partly finance the plan, similar to Federal Deposit Insurance Corp. for bank deposits.
This is almost the beginning of a negotiation, Schumer said. I do think theyre open to suggestions. The fact that they went along and said theyd be open to an [industry-funded program] that I asked them about. Thats a big step because that means some of the money will come from the industry.
Schumer also floated the notion of giving the Treasury a portion of the $700 billion now and revisiting the success of the program in January. But Paulson was not as supportive.
I think that would be a grave mistake, the secretary said. This is about market confidence, and we need to have the tools to do it right.
House Democrats were warning that Bush would have to line up significant GOP support to pass the package and said the president needs to use the bully pulpit.
The president needs to sit down in the Oval Office and talk to the American people, House Majority Whip James Clyburn (D-S.C.) said.
But a GOP leadership aide complained Democrats havent reached out yet.
Until the Democrats start negotiating on a bipartisan basis, it is hard to know exactly what we will be considering, or what level of GOP support it would garner, the aide said.
Democrats, however, said Republicans have been invited to every meeting and have been given every draft proposal.
This is a Republican package, said Nadeam Elshami, spokesman for Speaker Nancy Pelosi (D-Calif.). We took their package, and we are taking steps to make it more accountable to the taxpayers, add transparency and oversight, add protections for homeowners and deal with the executive compensation. ... The Speaker has said we are going to insulate Main Street from this Wall Street crisis, and we are moving forward.
But both sides face heat internally, with liberals upset with what some see as a handout to Wall Street cronies and with conservatives who are appalled at the unprecedented intervention in the free market.
This administration has no credibility at all, Rep. Jim McGovern (D-Mass.) said. The last time they asked for a blank check, we got stuck with the war in Iraq. ... I know the administration is anxious to bail out Wall Street, but I dont represent Wall Street.
McGovern said that at a minimum, the Bush administration is going to have to give in to Democratic demands for a broader stimulus package.
If the administration wants me to eat some s---, theyre going to have to eat some s---, too, he said.
The political backlash is hitting lawmakers in their offices and mail, with voters wondering why a bailout is necessary and how it got to this point.
We are a reflection of America, Rep. Phil Gingrey (R-Ga.) said. The public doesnt support this thing because they see it as a bailout for Wall Street and they dont understand the consequences for not doing it.
Members of the conservative Republican Study Committee ridiculed the bailout and argued instead for a cut in corporate tax rates and the suspension of the capital gains tax.
And they also objected to being told that they have to act immediately. The last time I heard that I was on a used car lot, said Rep. Mike Pence (R-Ind.), who is opposing the bailout.
Initially I think the whole thing stinks, Rep. Zach Wamp (R-Tenn.) said after the GOP meeting with Cheney. Everyone in the room thinks that this really stinks.
Wamp said lawmakers want some assurance that taxpayers wont lose out on the deal and CEOs wont benefit. But Wamp said Members also see the risk that inaction could prompt a fiscal crisis.
Its a heavy task to try and convince the Congress six weeks before an election that this kind of rescue plan is necessary, he said. Its going to be a close call at this point.