White House Senses Leverage for Endgame

Posted September 22, 2008 at 6:55pm

Bush administration officials believe they have leverage as they press for a $700 billion bank bailout package, wagering Democrats must act out of fear they will be tarred with blame for the economic fallout if a deal isn’t struck.

“My take is, they need this as much as we do,” one senior administration official said. “For the Democratic majority to say, ‘We’re not going to do this because we didn’t get our infrastructure money’ — well, I’d like to see them then live with the market crash.”

Nevertheless, with a crisis at hand, the administration is willing to consider at least some Democratic proposals, though not the full gamut of stimulus and other ideas Democratic leaders are pushing.

“We would like to work with them and be reasonable,” the senior administration official said. “But we’re not going to need to take all of their crap.”

Democrats are pushing an array of initiatives, including disaster relief money — far more of it than the administration thinks is needed to replenish depleted Federal Emergency Management Agency accounts — and a $50 billion “Stimulus II” package that includes added unemployment benefits, infrastructure projects, food stamps, home heating aid and other provisions.

The White House is taking a look at some of the stimulus measures. Administration officials also recognize they must deal on the bank rescue package with Democrats, but there is suspicion they may not need to accept too many of the proposals injected into negotiations by Senate Banking, Housing and Urban Affairs Chairman Chris Dodd (D-Conn.).

According to one source familiar with the bailout talks, Treasury officials spent the weekend negotiating with bipartisan staffers of the House Financial Services Committee, which is chaired by Rep. Barney Frank (D-Mass.). Dodd aides did not attend. By Sunday evening, Treasury officials and Financial Services panel aides had progressed to the point that they were reviewing legislative language. At midnight, Dodd’s people suddenly walked in with new proposals, according to the source.

Some in the administration believe that Dodd’s late entry connotes a lack of seriousness, and few of his demands — which are much further from the initial Treasury proposal than Frank’s — need to be put into the final package.

Dodd’s office couldn’t be reached for comment.

Early Monday, Bush in a statement sought to ratchet up the pressure for a deal.

“The whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts,” he said.

During an address today to the United Nations, Bush will discuss the crisis facing the international economy, according to a White House official.

Bush aides, hoping for a lame-duck session during which they can accomplish unmet goals such as passage of a free-trade deal with Colombia, are also leery of the continuing resolution being worked up by Democrats that extends until March 2009.

Administration officials are not certain they could sustain a veto simply over the date — though they may be able to avoid an override if Democrats overload the measure with spending.

It is also possible, some in the White House calculate, that Congress will have to return anyway to complete unfinished business — possibly to pass legislation to renew expiring tax provisions or to hold hearings on the bailout legislation.