Congressional talks over a $700 billion rescue plan for at-risk financial institutions were revived today after House Minority Whip Blunt was designated to negotiate for his Conference. House Minority Leader Boehner tabbed Blunt to sell a last-minute alternative to negotiators who are already crafting a bill that could be passed by this weekend so markets would be assured by Monday. Senate Budget ranking member Judd Gregg said Blunt's appointment is "very good news and very positive" in moving along talks, which were stymied after Financial Services ranking member Spencer Bachus said Thursday he did not have authority to cut a deal.
Blunt will be selling a proposal drawn up by House Chief Deputy Minority Whip Eric Cantor of Virginia and others designed to counter Treasury Secretary Paulson's plan that would allow his department to purchase bad mortgage debt off the books from at-risk banks in an effort to solve the nation's looming liquidity crisis -- a concept endorsed by negotiators representing Senate and House Democrats as well as Senate Republicans. The House GOP plan would require the Treasury Department to create a program to insure about half of all mortgage-backed securities that the federal government currently does not guarantee. But Paulson has told lawmakers it is unworkable. House Financial Services Chairman Barney Frank said that Paulson would be willing to accept the House GOP plan as an option, but not as a replacement for granting Treasury the ability to purchase the debt either directly or through auctions. "The problem is it's unworkable if there is no government subsidy, because he said you are not accomplishing anything," said Frank. "Nobody ever objected to that being an option. The problem is they wanted to substitute it for his plan." Senior House GOP aides said they believe the White House will push Paulson to back an insurance plan as an option to bring about a quick compromise. When asked whether Treasury officials support some type of an insurance model, Bachus said, "They're going to have to, if they want a bill." One lobbyist said that such a deal could give the House GOP a "political and negotiating victory" to show for before they leave town.
Blunt and Frank are expected to meet with Senate negotiators, Gregg and Banking Chairman Christopher Dodd, and Paulson later today. Frank said Paulson has agreed to accept some congressional changes to his plan so the $700 billion would have to be allocated in installments and Treasury would be required to include equity sharing through the use of warrants so the federal government could share on the upside when the firms were restored to financial health. Paulson has already agreed to accept limits on executive compensation for firms that participate. "He accepts the need to do all three," Frank said. "We are negotiating among ourselves as to those specifics." The activity came as President Bush again called on Congress to act quickly. Senate Majority Leader Reid echoed such calls: "We're going to get this done and stay in session as long as it takes to get this done," Reid said.
This article appears in the September 27, 2008, edition of National Journal Daily PM Update.