The day began with an agreement that Washington hoped would end the financial crisis that has gripped the nation. It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.
“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.
By 10:30 p.m., after another round of talks, Congressional negotiators gave up for the night and said they would try again on Friday. Left uncertain was the fate of the bailout, which the White House says is urgently needed to fix broken financial and credit markets, as well as whether the first presidential debate would go forward as planned Friday night in Mississippi.
When Congressional leaders and Senators John McCain and Barack Obama, the two major party presidential candidates, trooped to the White House Thursday afternoon, all signs pointed toward a bipartisan agreement on a grand compromise that could be accepted by all sides and signed into law by the weekend. It was to have pumped billions of dollars into the financial system and transformed the way Wall Street is regulated.
“We’re in a serious economic crisis,” Mr. Bush told reporters as the meeting began shortly before 4 p.m. in the Cabinet Room, adding, “My hope is we can reach an agreement very shortly.”
But once the doors closed, the smooth-talking House Republican leader, John A. Boehner of Ohio, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.
So Boehner and other Republicans killed it. But why? McCain arrived in D.C. either as a stunt for his campaign, or to offer cover to the GOP (depending on who you believe) but it appears he was unable to gather support from his recalcitrant colleagues. In fact, Boehner and other Republicans appear to be proposing a radically different plan altogether:
Early yesterday, Democratic and Republican leaders said they had reached agreement on the "fundamentals" of a deal. But at a meeting later at the White House that included President Bush, top lawmakers and both presidential candidates, House Minority Leader John A. Boehner (R-Ohio) mentioned a new plan for addressing the crisis that has hobbled global markets.
Under the plan, the government would set up an expanded insurance system, financed by the banks, that would rescue individual home mortgages. The government would not have to buy up the toxic mortgage-backed assets that are weighing down financial institutions.
So you're probably wondering like I am where the hell this idea came from. Democrats are accusing Boehner and other Republicans of torpedoing the deal so McCain could get credit for rescuing it, but that seems strange to me seeing as how McCain is already in D.C. and appeared to accept the defunct proposal. If it is a stunt, then we'll probably see a deal worked out tomorrow as Republicans appear to come back around to the original while praising McCain for his leadership. If it's not a stunt...then I don't know if anybody in D.C. or anywhere else knows what this plan is going to look like, or when it's finally going to get passed.
Incidentally, while Republicans in Congress may or may not be playing games with the bailout package, the Federal government has moved to seize Washington Mutual and is directing an emergency sale of almost all of its assets. It is the largest failure of a bank in American history. Also, the credit crunch has finally worked its way down to consumers; larger bank chains entangled in the subprime mess are finding themselves considerably more reluctant to make not only home loans, but auto and college loans as well. I know haste in passing the bailout package is likely to produce a terrible plan but news like that makes even someone as laid-back as myself a little fidgety.
UPDATE: After reading this article in the Politico on the collapse of talks, I still can't say for sure what's going on. Or if it's any one thing for that matter. Some House Republicans seem to be genuinely opposed to the bailout, but their frustrations somehow got lost in the shuffle. There also appears to be some jockeying to have McCain "save" the deal, though I honestly don't know how McCain is supposed to motivate House Republicans who are not his working colleagues when there is no certainty that he'll be the next President, and it appears that at least one Republican-Mike Pence of Indiana, who is opposed to the bailout-thinks McCain is there to help them get their deal passed. In other words, whatever consensus that appeared to exist as of yesterday afternoon and early evening, is now completely gone. Talks have resumed as of this morning.
UPDATE II: This article in the NY Times states that McCain never laid out explicit support for any plan yesterday. If that's the case...then what the hell is he doing there? Amazingly, there appears to be no discussion about Bush motivating Republicans; it appears to be a foregone conclusion that he cannot.
UPDATE III: I'm listening to NPR, and Renee Montagne and Steve Inskeep are drilling McCain advisor Douglas Holtz-Eakin. They asked him why he rushed back to D.C. only to appear to endorse no plan explicitly, and what exactly his role is there now. Holtz-Eaken has nothing to say other than basically, McCain is there to help out and support whatever plan both the parties agree to. Seriously?
UPDATE IV:Laura Rozen, who has a source on the Hill, is worth reading. Apparently, the rank and file were never behind this plan as much as it appeared, and voter anger over the bailout is not getting enough attention. Apparently there are quite a few Senators and House members who have no desire to put their names no a bill that gives billions to Wall Street, and the modified Paulson plan that seemed so close to getting passed may be way deader than we think.
UPDATE V: Maybe the death of this modified Paulson plan is a good thing, since a growing number of economists say it's the wrong way to go. House Republicans appear to agree.