Dems Protest Bush's Surprise Veto Of Defense Bill

At the behest of the Iraqi government, President Bush will veto the annual defense authorization bill, saying an obscure provision in the legislation could make Iraqi assets held in U.S. banks vulnerable to lawsuits.

The veto startled Democratic congressional leaders, who believe Bush is bowing to pressure from the Iraqi government over a technical provision in the bill. The veto was unexpected because there was no veto threat and the legislation passed both chambers of Congress overwhelmingly.

Democratic leaders say the provision in question could easily be worked out, but in vetoing the massive defense policy bill, military pay raises may be on hold, as well as dozens of other programs.

"We understand that the president is bowing to the demands of the Iraqi government, which is threatening to withdraw billions of dollars invested in U.S. banks if this bill is signed," said House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), in a joint statement. “The administration should have raised its objections earlier, when this issue could have been addressed without a veto."

A White House spokesman said the veto would officially be delivered later today.

At issue is a provision deep in the defense authorization bill, which would essentially allows people harmed by Saddam Hussein's regime to sue for damages. The Iraqi government believes such lawsuits could target up to $25 billion in Iraqi assets held in U.S. banks, even though congressional leaders dispute that. Iraq has threatened to pull all of its money out of the U.S. banking system if the provision remains in the bill.