The Bush administration and congressional leaders moved closer to an agreement on a historic $700 billion bailout for financial firms on Monday, including tight congressional oversight and new help for homeowners at risk of foreclosure.
But lawmakers in both parties voiced anger over the steep cost and even skepticism about the plan's chances of success.
As a ferocious debate began on Capitol Hill on Monday, Congress and the administration remained at odds over specific features that some lawmakers are demanding, including limits on the pay of top executives whose firms seek help, and new authority to allow bankruptcy judges to modify mortgage terms for borrowers facing foreclosure.
Congressional leaders and Treasury officials also said they were close to an agreement over a proposal by some Democrats in which taxpayers could receive an ownership stake, in the form of warrants to buy stock, from firms seeking to unload distressed debt.
The administration would accept this provision as long as it did not require it to obtain an equity stake, a Treasury official said.
Despite the progress, the rancorous debate ratcheted up the pressure on Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the architects of the proposal to let financial institutions around the world pass their most distressed mortgage-related assets to the U.S. Treasury.
Both are scheduled to appear before the Senate banking committee on Tuesday, where they must now sell the bailout plan to dubious lawmakers and to an increasingly angry and frustrated public.
“I am concerned that Treasury's proposal is neither workable nor comprehensive despite its enormous price tag,” Sen. Richard Shelby of Alabama, the senior Republican on the banking committee, said in a statement. “It would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted.”
While congressional leaders in both chambers said they were confident that they could reach a quick deal, it was also clear that Paulson and Bernanke would face rough questioning and that initial support for the bailout had begun to fray. Some Democrats said they simply did not trust the president, and drew a parallel to Bush's request for authority to wage war in Iraq.
Some conservative Republicans also expressed outrage, echoing scornful comments by Newt Gingrich, the former House speaker, and Lou Dobbs, the CNN anchor, among other right-leaning critics.
Treasury officials brushed off the protests from influential Republicans, like Shelby. They said they were confident that Republican leaders could bring their members along. “We are making progress and have confidence that a plan will pass by the end of this week,” said Michele Davis, a spokeswoman for Paulson.
President Bush on Monday urged Congress to act fast. “Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants,” he said in a statement. “The whole word is watching to see if we can act quickly to shore up our markets.”
The majority leader, Sen. Harry Reid of Nevada, said Democrats were prepared to do so. “Democrats in the Senate aren't going to drag our feet,” he said in a speech on the Senate floor. “We'll respond with the urgency of action that this situation demands, but after eight years of fiscal dereliction of duty, it's time for accountability.”
Early on Monday, Sen. Christopher Dodd, D-Conn., and chairman of the banking committee, unveiled a 44-page draft bill that his staff pulled together on Sunday incorporating many priorities of Senate Democrats – a hefty counterproposal to the administration's initial three-page proposal.
Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee, who had already submitted a series of demands to the Treasury, worked throughout Monday to revise his version of the legislation to reflect various agreements with the administration on oversight and other issues.
Officials said that the administration was prepared to adopt conflicts-of-interest rules for any private firms that are hired to help the Treasury manage the bailout program. Some lawmakers were worried that such firms might also own assets that could grow in value depending on how the rescue plan is run.
Republican leaders who support the administration's plan warned the Democrats on Monday to exercise restraint and not slow the bailout package, even as they prepared for an aggressive internal campaign to rally Republican support.
Powerful lawmakers in both parties said they would not be rushed into granting Bush's request.
“I walked down LaSalle Street on Friday, a great street in Chicago lined with banks and big office buildings,” said Sen. Richard Durbin of Illinois, the No. 2 Democrat. “A lot of people came up and said ‘hi.' But a lot of them came up and said: ‘Are you really going to do this? $700 billion bailing out the banks?' And I said: ‘I don't know. At the end of the day, I just don't know.' ”
The skepticism was equally palpable at the other end of the ideological spectrum.
“This is going way too fast,” said Rep. Mike Pence, R-Ind., and a conservative leader who said constituents he encountered at a weekend fish fry were flabbergasted at the plan. “The American people don't want Congress to make haste with the financial recovery legislation; they want us to make sense.”