Bush confident bailout plan will stabilize the economyPosted: Updated:
(AP) - Key supporters of a Wall Street bailoutpackage prodded lawmakers to approve the plan hours ahead of adifficult House vote on Monday, with President Bush saying it isneeded to "keep the crisis in our financial system from spreadingthroughout our economy." "Every member of Congress and every American should keep inmind that a vote for this bill is a vote to prevent economic damageto you and your community," said Bush, fully aware thatcongressional passage of the $700 billion compromise legislation isfar from assured. "With this strong and decisive legislation," he said, "wewill help restart the flow of credit so American families can meettheir daily needs and American businesses can make purchases, shipgoods and meet their payrolls." Two leading players in the negotiations also spoke early Monday,taking to television news shows to lobby for approval of a packagedeeply unpopular with a public angry that taxpayer money will saveWall Street firms from heavy risk-taking. Thousands of angry phonecalls, e-mails and letters have poured into Capitol Hill fromconstituents. But Sen. Chris Dodd, D-Conn., said that failure to act wouldspread the contagion of frozen credit markets even further. "Thisis not just about Wall Street," said the Banking Committeechairman. Sen. Judd Gregg, R-N.H., who represented fellow Republicans inthe hard-fought 10 days of talks that culminated in a deal earlySunday morning, called it a "tourniquet" for the ailing financialindustry and slow-moving economy. Still, both men said the necessity of such massive governmentaction is a sad day for the nation. Asked if the legislation,slated for a vote in the House later Monday and a Senate vote asearly as Wednesday, would pass, Dodd said only: "We hope so." These players were speaking not just to rank-and-file lawmakersto whom the spotlight now turns in this contentious, dramaticdebate, but to U.S. and global markets which have displayednervousness about Washington's determination to act. Investors worldwide and in early trading in the United Statescontinued to show doubt about whether the bill would go through,much less go a long way toward curing the systemic problems thathave unnerved financial markets across the globe for weeks. There was a further sign of general economic deteriorationMonday as the Commerce Department reported that consumer spendingwas unchanged in August - even worse than the small 0.2 percentgain that economists had anticipated. It was the weakest showingsince spending was also flat in February. Federal Reserve Chairman Ben Bernanke, in a statement Monday,said he welcomed agreement on a compromise bill. "This legislation should help to restore the flow of credit tohouseholds and businesses that is essential for economic growth andjob creation, while at the same time affording strong and necessaryprotections for taxpayers," Bernanke said, calling for swiftpassage. Bush said he "fully understands" the bailout bill is adifficult vote for lawmakers. But he argued that jittery U.S. taxpayers will benefit from anumber of safeguards that lawmakers wrote into the pendinglegislation, including checks and balances on the operation of theprogram, curbs on "golden parachutes" for top executives of firmsgetting help, and assurances that taxpayers would ultimately bereimbursed by the companies for any losses. But the governmentwould have broad discretion to decide how to implement both. Thelegislation also requires that the government take ownership stakesin companies that receive federal infusions, so it could share apiece of potential future profits. Bush also said the ultimate cost of the bailout will be muchless than the $700 billion authorized in the bill. The sour assets- mostly mortgage-backed securities - that the program allows thegovernment to take off the books of struggling financialinstitutions will eventually be sold, perhaps even at a profit. Still, the president hinted that this may not be the lastintervention required. "It's been a volatile time for our financial system and oureconomy," he said. "Even with the important steps we're taking toaddress the current crisis, we will continue to face seriouschallenges." Treasury Secretary Henry Paulson sought the unprecedented amountof money with little supervision. Instead, the bill lets Congress block half the money and forcethe president to jump through some hoops before using it all. Thegovernment could get at $250 billion immediately, $100 billion moreif the president certified it was necessary, and the last $350billion with a separate certification - and subject to acongressional resolution of disapproval. Still, the resolutioncould be vetoed by the president, meaning it would take extra-largecongressional majorities to stop it. Banks, credit unions, securities brokers and dealers, andinsurance companies, among others, could get the help as long asthey had "significant operations" in the United States.Originally designed to help companies get rotten mortgage-relatedinvestments off their balance sheets, the legislation would allowthe government to buy up any kind of asset top economic officialsthink is necessary to promote market stability. The final 110-page bill was released Sunday evening after afinal weekend of intense negotiating, and Republicans and Democratshuddled for hours in private meetings Sunday night to learn itsdetails and voice their concerns. Many said they left uncertain ofhow they would vote. Lawmakers in both parties who are facing re-election areparticularly nervous about embracing such a costly plan proposed bya deeply unpopular president that would benefit perhaps the mostpublicly detested of all: companies that got rich off bad bets. "Nobody wants to have to support this bill," said Rep. John A.Boehner, R-Ohio, the House minority leader. But he said he wasurging "every member whose conscience will allow them to supportthis" to do so. Officials in both parties expected the vote to bea nail-biter. The two major party presidential candidates - Republican JohnMcCain and Democrat Barack Obama - expressed tepid support for thebailout. Rep. Joe Barton, R-Texas, an opponent, estimated that half ofthe House's 199 Republicans are "truly undecided." Democratic Rep. Elijah Cummings, D-Md., said he was inclined tooppose the bill. But he added: "A lot of people are going to holdtheir nose and vote for it, because they've been put in a badposition and they don't have any other option."