Bush says action needed now on bailout

September 26, 2008 8:00:10 AM PDT
President Bush scrambled Friday to bring rebellious members of his own party behind a multibillion-dollar government bailout of the financial system amid bitter political recriminations from both Democrats and Republicans over collapsed negotiations. [INTERACTIVE: Understanding the financial meltdown]

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, especially after Washington Mutual Inc. became the largest U.S. bank to fail. The Dow Jones industrial average fell more than 100 points, while fears of a deepening economic crisis fed safe-haven buying in Treasury notes.

Earlier Friday, 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.

Bush decided to speak, and also was in constant contact with Treasury Secretary Henry Paulson, who was returning to talks with lawmakers, White House press secretary Dana Perino said. Vice President Dick Cheney canceled planned travel Friday to New Mexico and Wyoming to remain in Washington and jawbone lawmakers.

And the campaign season's first face-to-face debate between presidential candidates John McCain and Barack Obama, scheduled for Friday night, was still in doubt.

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.

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.

Frank said he did not think that Democrats were going to see a substantially different proposal from the plan the administration has been trying to sell to lawmakers and which had been the focal point of closed-door talks for days. He called the rival proposal being pushed by House conservative Republicans "an ambush plan."

Participants in a meeting late Thursday afternoon that Bush had at the White House with congressional leaders, McCain and Obama said that it descended into arguments. Disagreements were so deep-seated that some lawmakers wondered aloud just who -- and how many -- would show up for the resumption of talks, presumably Friday morning, at the Capitol.

"I didn't know I was going to be the referee for an internal GOP ideological civil war," Frank, D-Mass., said on CBS's "The Early Show."

Sen. Richard Shelby, an Alabama Republican, said many GOP lawmakers dislike the proposal that has been pushed on the administration's behalf principally by Paulson. "Basically, I believe the Paulson proposal is badly structured," he said. "It does nothing basically for the stressed mortgage payer. It does a lot for three or four or five banks . ... "

Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.

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."

The presence of McCain and Obama at the White House session indeed lent a greater aura of urgency -- and personal intensity -- to the discussion.

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.

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