Congress Restarts Troubled Bailout Talks

Associated Press

WASHINGTON (AP) -- President Bush told Congress Friday it must "rise to the occasion" and pass legislation bailing out the struggling financial system, even as leading lawmakers arranged to resume difficult closed-door negotiations.

Treasury Secretary Henry Paulson, struggling to keep an emerging bipartisan accord on the plan from imploding, was set to attend the restart of talks at midday. House Republicans said they would send a top leader to the closed-door session after the House GOP earlier boycotted bargaining on an emerging bipartisan agreement, calling it unacceptable.

Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging lawmakers have a right to express their doubts and work through disagreements on the $700 billion plan, but declaring they must work to avert an economic meltdown.

"There are disagreements over aspects of the rescue plan," he said, "but there is no disagreement that something substantial must be done. We are going to get a package passed."

Rep. Roy Blunt of Missouri, the No. 2 House Republican leader, was set to attend talks with key lawmakers.

GOP Presidential nominee John McCain, who had said he was suspending his campaign to forge a bipartisan agreement, reversed course and planned to attend the previously scheduled debate Friday night with Democratic rival Barack Obama.

Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging that lawmakers have a right to express their doubts and work through disagreements, but declaring they must "rise to the occasion" and approve a plan to avert an economic meltdown.

"There are disagreements over aspects of the rescue plan," he said, "but there is no disagreement that something substantial must be done. We are going to get a package passed."

On Wall Street, the level of institutional nervousness was palpable, with stocks bouncing up and down, especially after Washington Mutual Inc. became the largest U.S. bank to fail. The Dow Jones industrial average initially fell while fears of a deepening economic crisis fed safe-haven buying in Treasury notes.

Earlier, House Financial Services Chairman Barney Frank declared that an agreement depends on House Republicans "dropping this revolt" against the Bush-requested plan.

The Massachusetts Democrat said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at Thursday's extraordinary White House meeting, leaving six days of intensive efforts to agree on a bailout plan in tatters only hours after key congressional players of both parties had declared they were in accord on the outlines of a $700 billion bill.

Democrats put the responsibility on Bush for getting a rescue package back on track.

"We need to get the president to get the Republican House in order," Sen. Charles Schumer, D-N.Y., said on the Senate floor. "Without Republican cooperation, we cannot pass this bill."

Schumer said Bush should also "respectfully tell Sen. McCain to get out of town. He is not helping, he is harming. Before Sen. McCain made his announcement, we were making progress." Schumer was referring to McCain's announcement earlier in the week that he was suspending his campaign to return to Washington for the negotiations on the financial industry crisis.

McCain met briefly Friday morning with House Republican Leader John Boehner.

Bush decided to make his brief remarks Friday in hopes of projecting calm for both the markets and the talks that were to resume on Capitol Hill with key lawmakers and Paulson, said White House counselor Ed Gillespie.

Bush, whose style is usually to leave the personal lobbying to others, was on the phone repeatedly Friday with lawmakers, particularly House Republicans, and planned to do so all day. Vice President Dick Cheney, who is particularly close with the conservative wing of the party, canceled a trip to devote the day to keeping in telephone contact with the Hill from his White House office.

Among the topics of the conversations was how some elements of a rival House GOP proposal could be incorporated into the final package, Gillespie said. "There are some things that may not work and some things that may work," he said.

The White House has seen the entire process as a delicate balancing act, between understanding the enormity of what Congress is being asked to do in such a short time, respecting their role as writers of legislation and keeping pressure in a time of crisis, Gillespie said. Friday, he said, is a time "to let things settle a little bit" and not "go back up to the Hill and have all the cameras running."

Senate Majority Leader Harry Reid made it clear that winning congressional approval of any rescue package will require Congress to delay a long-sought adjournment calculated to let lawmakers have five full weeks to campaign before the election.

"It appears quite evident that we're going to be in session next week," the Nevada Democrat said, adding there might be only one Senate vote Friday -- on a second economic stimulus package featuring an extension of unemployment benefits. "There are a number of number of moving parts here, we're going to try to put them together."

One of those parts is a resolution requiring Senate passage and Bush's signature to keep federal offices open after midnight next Tuesday, when the government fiscal year expires. The House passed it Wednesday and the Senate planned to vote on it Saturday.

The White House summit meeting had been called for the purpose of sealing the deal that Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public. But it quickly revealed that Bush's proposal had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.

Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way to make his point according to witnesses.

And when Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House's top Republican refused to send a negotiator.

"This is the president's own party," Frank said at the time. "I don't think a president has been repudiated so strongly by the congressional wing of his own party in a long time."

What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Boehner's blessing.

Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, R-Wis., a chief sponsor, said it was clear that Bush's plan "was not going to pass the House."

But Democrats said the same was true of the conservatives' plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.