After risk-taking on Wall Street brought the financial system to its knees, Democrats and Republicans on Capitol Hill are taking part in their own risk-taking exercise.
With Congress about to adjourn and with elections in less than six weeks, lawmakers are wrestling with what the Bush administration calls a must-pass bill — a $700 billion proposal to rescue the U.S. financial sector.
But it seems increasingly questionable that the bill — still in its drafting stages — will pass by Congress' self-imposed deadline of Friday, when it is supposed to adjourn for the elections.
Among rank-and-file congressional Democrats, there is deep anger that the end result is likely to be a bailout designed by the Bush administration but made possible only by sufficient votes from Democratic members of Congress.
Yet Democrats face the risk that they will be blamed if they fail to pass a rescue bill and Main Street America feels the impact of an economic disaster.
Enough votes to block passage?
Meanwhile, many Republicans also are skeptical. Some say that so far they are not seeing the impact of the credit crisis in their districts. So it is entirely possible that there might be enough disaffected Democrats and Republicans to prevent the bill from being passed in its current form.
One of the problems is that Treasury Secretary Hank Paulson faces a credibility gap on Capitol Hill that many trace to the Bush administration's handling of the Iraq war, launched long before Paulson signed on in 2006.
After a day of questioning by members of the Senate Banking Committee on Tuesday, Paulson and Federal Reserve Chairman Ben Bernanke will return for another grilling Wednesday afternoon before the House Financial Services Committee.
“As much as I admire Secretary Paulson and Ben Bernanke, this administration has no credibility at all,” said veteran liberal Democrat Rep. Jim McGovern of Massachusetts. “I wouldn’t trust them to tell me the correct time.”
House Majority Leader Steny Hoyer said President Bush, even with his diminished credibility among Democrats, ought to go on national television and appeal to the American people to support the rescue bill.
Hoyer stressed to reporters that the Bush administration’s arguments for the bailout bill were “their rationale” and the request for $700 billion “their request.”
“This is administration policy. We didn’t suggest this — this is not our program,” Hoyer told reporters.
But in the end it will be Hoyer and other Democratic leaders who will have to find the Democratic votes to pass the bill.
What if House GOP balks?
“Certainly we expect the Republicans to be supportive of their administration in meeting this crisis. If they conclude their administration is wrong, then they will act accordingly and we will have to be informed by that as well,” Hoyer added.
It was a not-so-subtle warning to House GOP leaders that they would need to round up votes on their side to make the deal possible.
House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., said a melded House-Senate bill would be ready shortly. He remains confident that the bill will pass.
He said financial markets had not collapsed even in spite of the uncertainty over the bill's fate and would not collapse "as long as it looks as if we are seriously engaged" in negotiating with the Bush administration on the bill.
Democrats plan to pass a separate spending bill this week which will include loans for auto manufacturers, money for heating assistance for people in cold-weather states, and disaster relief funds for Iowa, Texas, and Louisiana.
Bush would need to sign that bill to keep Democrats cooperative on the financial bailout bill.
As modified by Frank, the bailout bill would provide $700 billion to buy distressed assets from banks and investment firms. In addition to the so-called toxic debt, the Treasury would get warrants that would give the federal government a potential ownership stake in such firms if they take part in the bailout.
Frank’s version also would impose some limits on pay and benefits for company executives, including a two-year ban on so-called “golden parachutes,” the multimillion-dollar payouts that often go to departing top executives at big companies.
“We’re making some progress,” House Speaker Nancy Pelosi assured reporters Tuesday, and Hoyer said “our hope” is that the rescue bill will be put to a vote on the House floor Thursday or Friday.
But some House Democrats said they expected to be in session over the weekend.
“It’s not reasonable to think it will be done by the end of the week,” said Rep. Bill Clay, D-Mo., a member of the Financial Services Committee, which will debate the bill, probably on Thursday.
If negotiating on the bill stretches into next week, it would remove some of the feeling of urgency and perhaps the willingness of bargainers on both sides to make accommodations to the opposing side.
Some Democrats were warily waiting to see how the bailout bill changes over the next 48 hours.
After House Democrats huddled Tuesday at lunch, first-term Rep. Joe Courtney of Connecticut said, “It is still temperature-taking at this point. The speaker is smart not to be staking out positions.”
He said the Democratic leadership was trying to find “the sweet spot,” the right mix in the bill to please a sufficient number of Democrats to get it passed.
Looking for 'Republican fingerprints'
But he added that a Wall Street bailout passed mostly with Democratic votes “is certainly not the endgame Pelosi wants. They are looking to get Republican fingerprints on a final package.”
House Democratic leadership sources say GOP leaders can't reasonably expect the Democratic leaders to guarantee 180 Democratic votes (out of a Democratic membership of 235) and then only have few Republicans join the Democrats to pass the bill.
Some Democrats were insisting that the bill must include features Republicans were bound to find repugnant.
McGovern and other Democrats said the hurry-up approach taken by the administration reminded them all too eerily of the run-up to the Iraq War, with a vote forced right before the 2002 elections.
“It’s the same as with the Iraq war, the administration saying ‘Trust us, give us everything we want,’” McGovern said.
Sen. Bob Menendez, D-N.J., said, “I don’t want to be stampeded into wrong decisions, wrong for the country, wrong for the markets and, above all, wrong for the taxpayers. Some people got stampeded into voting for the war in Iraq; I’m not ready to do that in this case.”
As with many votes in Congress, it was impossible to know if some complaints voiced by members were simply part of the bargaining to get Bush and the Democratic leadership to redesign the bill in a way more pleasing to individual Democrats.
Loud complaints often are followed by reluctant votes in line with House leadership. And House Democratic leaders clearly want to pass a rescue bill.
On the Republican side, many House members still were skeptical, even after a briefing Tuesday morning from Vice President Dick Cheney and White House Chief of Staff Josh Bolten.
“Should something be done? Probably. But whether this bill is the right approach or not is still up in the air in my mind,” said Rep. Jim Gerlach, R-Pa., a member of the Financial Services Committee.
“We need to see in the next day or two, when more details come into clarity, and then make a decision.”
He added, “I learned a long time ago if you don’t have to vote today, you don’t have to make up your mind today.”
How's it affecting southeast Pennsylvania?
In his district in southeast Pennsylvania, Gerlach said the Wall Street crisis has not so far caused a seizing-up of credit for businesses.
“I had a meeting this morning with my financial services advisory committee, some local bankers and insurance people, and no one stressed any problems they’re having with credit and liquidity. They’re doing OK and we still have a pretty good economy going in southeast Pennsylvania.”
A group of staunch conservative House Republicans offered their own proposals Tuesday, including a suspension of the capital gains tax, in order to free up capital to be invested in distressed assets.
If there must be a bailout, they said, it should be paid for not by tax increases or by borrowing, but by royalties paid by oil and gas drilling on the Outer Continental Shelf and in Alaska’s Arctic National Wildlife Refuge.
Although such ideas are non-starters in the current Congress, the votes of the conservative Republicans may prove to be decisive.
“We need to be reaching out to the Blue Dog (fiscal conservative) Democrats and see where they’re coming from on this issue. It could be a very interesting alignment of interests who come together to vote ‘no,’” said conservative GOP leader Rep. Michele Bachmann, R-Minn.
Perhaps with an Obama presidency in mind, Bachmann warned that the bailout bill would give too much power not only to the current Treasury secretary but to the next one as well.
“We don’t know what the full power of the Treasury would be going forward. This isn’t just about Paulson and a Republican administration.”