Democrats insist Republicans back finance rescue plan

Sep 27, 2008, 13:39 GMT

Washington - Congress wrestled Friday across party lines over a deeply unpopular financial industry rescue plan as majority Democrats insisted that Republicans get on board before holding a vote.

The White House pulled out all the stops, sending top officials to Capitol Hill, where negotiations continued over the controversial, 700-billion-dollar life raft for Wall Street.

Talks looked likely to continue over the weekend, House Speaker Nancy Pelosi said.

'We'll be in as long as it takes, and we hope it doesn't take long, because the markets need a message from us,' she told reporters Friday following another round of meetings on the bailout.

President George W Bush said that Congress needs to pass the bill immediately to head off a severe recession as the deepening crisis over bad mortgage debt drains capital markets of their credit lines.

Bush tried to calm nervous markets, saying he was optimistic and determined to reach an agreement.

'We will rise to the occasion,' he said. 'Republicans and Democrats will come together and pass a substantial rescue plan.'

The financial crisis and ensuing political wrangling come less than six weeks before the November 4 general elections.

This week, the uproar threatened to derail the first presidential debate between Democrat Barack Obama, 47, and Republican John McCain, 72. But the Friday evening event was back on schedule.

The nation faces 'complete and total financial collapse' unless the measure passes 'as quickly as possible,' so that trust is restored to the financial community to lend money, White House spokeswoman Dana Perino said.

She said credit markets 'have shown troubling signs of tightening up even more in the past several days.'

Perino and Senate Majority Leader Harry Reid agreed the plan could pass by Monday morning, but House Republicans were dragging their feet.

Tempers flared as Reid charged that McCain had derailed a congressional agreement that was nearly clinched Thursday, by suspending his campaign and rushing to Washington to get involved.

Democrats, who have held the majority in Congress for two years, are in the politically precarious position of being allied with the Republican Bush, who has the worst approval ratings for any president in more than 30 years, to stave off full-blown financial panic.

Pelosi said her party does not have enough votes to pass the plan in the House without having Republican support, because a number of Democrats were also reluctant to vote in favour of the plan.

Barney Frank, chairman of the House Financial Service Committee, noted it was important to reach a bipartisan deal to prevent either party from using the bailout against the other as a campaign issue in November. He praised House Republicans for taking part in Friday's discussions after boycotting earlier meetings.

Democrats insist that a majority of Republicans in Congress get behind the bill, seeking the political cover of a bipartisan plan amid an increasingly angry public reaction to the idea that tax dollars will rescue the Wall Street firms whose reckless investments sparked the current crisis.

Republicans, having lost the congressional majority in 2006 amid Bush's increasing unpopularity, are looking to elections on November 4 with an even more worried eye over the mammoth bailout.

The House Republican leader John Boehner said that his members believed that the country is 'on the edge of an economic crisis' but wanted to make sure Congress can do the 'right thing for our country and protect our taxpayers.'

'We will not agree to a bill that sells taxpayers out to bail out Wall Street,' he said.

Republican Congressman Roy Blunt, who is heading negotiations in the House, suggested that Democrats could pass the bill at 'any moment if they want to.' To get support from House Republicans, however, the rescue plan needed to add 'free-enterprise protections.' He did not give details.

The standoff reflects the deep ideological divisions over what would be the largest-ever government intervention in capital markets.

For Republicans, including Bush, the year-long government scramble to prop up financial firms and markets has gone against their belief in free markets.

The 700-billion-dollar plan, pitched by Bush in a moment of urgency just last week as the investment banking industry collapsed, would allow the government to buy up 'toxic' assets to sell off later, when the housing market stabilizes.

Democrats like Reid blame Republicans for the crisis by excessively deregulating the finance and mortgage-lending industries.

Both parties are angry over the exorbitant compensation packages Wall Street has paid itself for ever more risky investment schemes leading up to the crisis.

Democrats in both chambers along with Senate Republicans have already wrested concessions from the White House and Treasury Secretary Henry Paulson to allow limits on executive compensation in firms being helped, on partial government equity stakes in the companies and on a bipartisan oversight panel for the bailout.

Democrats are insisting that added money be made available to keep people in their homes who are facing foreclosure.

'We can't do it alone,' Reid said. 'We need House Republicans on board.'