Bush Seeks $700B For Bad Debt Bailout

(CBS/ AP)  The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.

"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing specifics, he said, "This is a big package because it was a big problem."

But lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money.

"The federal government is going to have loans that aren't repaid," Peter Morici, an economist at the University of Maryland, told CBS News. "That's the American public, and in turn it will take possession of the houses and have to resell them."

Morici estimates Americans might end up permanently responsible for half the debt - up to $300 billion, reports CBS News correspondent Kimberly Dozier. Congress wants to help those borrowers out by helping them refinance those bad loans, but that's not part of the deal so far.

The government must bail out the financial system "because if we don't, it will have a tremendous impact on American consumers, homeowners, taxpayers and the rest," House Speaker Nancy Pelosi, D-Calif., said at a citizens' workshop in San Francisco.

But, she added, "We cannot deal with this unless this bailout helps families stay in their homes."

Sen. Chuck Schumer, D-N.Y., called the plan "a good foundation," but said it was missing "some kind of supervisory authority, and some kind of protection for homeowners and taxpayers."

The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue, a move that some economists say is only realistic alternative in the face of dire alternatives.

"The American people are furious that we're in this situation, and so am I," the House's top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."

Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."

Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."

He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."

Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress.

Democratic rival Barack Obama used the party's weekly radio address to call for help for Main Street as well as Wall Street.

"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."

Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.

Besides mortgage help and executive compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility.

Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. "I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better," he said about legislation being drafted.

Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive compensation limits and new foreclosure-prevention measures.

Among the key issues up for negotiation is which financial institutions would be eligible for the help. The proposed legislation doesn't make it clear, leaving open the question of whether hedge funds or pension funds could qualify.

The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

The government could contract with private companies to manage the assets it purchased under the rescue.

Treasury Secretary Henry Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept.

If enacted, the plan would give the treasury secretary broad power to buy, manage and sell the mortgage-related investments without any additional involvement by lawmakers. It would, however, require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.

[mustcomment]

Why should taxpayers bail out all of our irresponsible wealthy neighbors? I didn''t buy a house because I couldn''t afford one. Doesn''t that make sense?

[riddelup]

Once we rushed to action and granted broad powers to a man who said he was going to fight terrorism. Instead he attacked a country with no ties to terrorism. This is not about him but about rashly giving authority to an entity claiming to have a solution to our problems. We cannot solve our problem by throwing money at them. We have a business sector who has badly mismanaged vast amounts of money, we now propose as a solution to give them huge amounts of money to further mismanage. This does not sound like a solution to me. I know congress is being lead around by high pressure lobbyist but we have the vote. The vote is all we have. Do not allow them take money from the needy and give to the greedy. Avarice is not an attribute.

[riddelup]

If you took 700 billion dollars and divided it between every adult citizen in the U.S. that would do more to save our system? If you think not you are not doing the math. All parties all peoples unite to prevent this lobby brokered travesty.

[mytoosense]

FDR started the National Dept during WWII, It stayed below one trillion dollars until Reagan took office. It was below six trillion dollars when Dubya took office. As a member of the party who preach fiscal responsibility, Bush Junior has doubled the dept to $11+ Trillion Dollars and what does this country have to show for it?

He can''t seem to be able to solve problems even by throwing obscene amounts of money at them.

The Republican Party and every American who voted for this Bafoon owes the rest of us an apology.

[kenammons]

congress please say no to this corrupt corporate bailout at the taxpayers expense. not another trillion dollars of wasted tax money under george the evil one

[lochlan-2009]

the House''s top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."


Fricken idiot!!! It''s corruption in D.C. from corpoarations to lobbyists to representatives and the media who stay silent, who should all be in prison for life for treason against America. But is D.C. going to do anything about it........ I think we all know the answer to that. NOT A CHANCE!!!!!!

[bm6005]

Question of the day: How does a retired military man from a line of military men manage to amass a personal wealth of $5 mil? Was this money earned while in the Navy? If so they certainly pay better than when I was in. If, as I suspect, it all was earned AFTER he became a congressman my question is answered!!!

[bm6005]

Are these your buds Georgie? The haves and the have mores?

[magoo2u1]

We are so screwed.

[babooph]

I still recall his request for 50 billion for the Iraq war-seems we end up with a "little " more-will there be enough left for tents for what was the middle class,or will they make their own,like in Africa-you know -the corrupt place.