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Pelosi: Rescue is not a bailout but a 'buy-in'
By Julie Hirschfeld Davis
Associated Press
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WASHINGTON -- Congressional leaders and the White House agreed Sunday to a $700 billion rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote Monday.

The plan, bollixed up for days by election-year politics, would give the administration broad power to use taxpayers’ money to purchase billions upon billions of home mortgage-related assets held by cash-starved financial firms.

Flexing its political muscle, Congress insisted on a stronger hand in controlling the money than the White House had wanted. Lawmakers had to navigate between angry voters with little regard for Wall Street and administration officials who warned that inaction would cause the economy to seize up and spiral into recession.

A deal in hand, Capitol Hill leaders scrambled to sell it to colleagues in both parties and acknowledged they were not certain it would pass. “Now we have to get the votes,” said Sen. Harry Reid, D-Nev., the majority leader.

The final legislation was released Sunday evening. House Republicans and Democrats met privately to review it and decide how they would vote. “This isn’t about a bailout of Wall Street, it’s a buy-in, so that we can turn our economy around,” said House Speaker Nancy Pelosi, D-Calif.

The largest government intervention in financial markets since the Great Depression casts Washington’s long shadow over Wall Street. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

“I don’t know of anyone here who wants the center of the economic universe to be Washington,” said a top negotiator, Sen. Chris Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee. But, he added, “The center of gravity is here temporarily. ... God forbid it’s here any longer than it takes to get credit moving again.”

The plan would let Congress block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification — and subject to a congressional resolution of disapproval.

Still, the resolution could be vetoed by the president, meaning it would take extra-large congressional majorities to stop it.

Lawmakers who struck a post-midnight deal on the plan with Treasury Secretary Henry Paulson predicted final congressional action might not come until Wednesday.

The proposal is designed to end a vicious downward spiral that has battered all levels of the economy. Hundreds of billions of dollars in investments based on mortgages have soured and cramped banks’ willingness to lend.

“This is the bottom line: If we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying,” Sen. Judd Gregg, the chief Senate Republican in the talks, told The Associated Press. “I do think we’ll be able to pass it, and it will be a bipartisan vote.”

A breakthrough came when Democrats agreed to incorporate a GOP demand — letting the government insure some bad home loans rather than buy them. That would limit the amount of federal money used in the rescue.

Another important bargain, vital to attracting support from centrist Democrats, would require that the government, after five years, submit a plan to Congress on how to recoup any losses from the companies that got help.

“This is something that all of us will swallow hard and go forward with,” said Republican presidential nominee John McCain. “The option of doing nothing is simply not an acceptable option.”

His Democratic rival Barack Obama sought credit for taxpayer safeguards added to the initial proposal from the Bush administration. “I was pushing very hard and involved in shaping those provisions,” he said.

Later, at a rally in Detroit, Obama said, “it looks like we will pass that plan very soon.”

House Republicans said they were reviewing the plan.

As late as Sunday afternoon, Republicans regarded the deal as “a proposal that is promising in principle, but that is still not final,” said Antonia Ferrier, a spokeswoman for Missouri Rep. Roy Blunt, the top House GOP negotiator.

Executives whose companies benefit from the rescue could not get “golden parachutes” and would see their pay packages limited. Firms that got the most help through the program — $300 million or more — would face steep taxes on any compensation for their top people over $500,000.

The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies’ future profits.

To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers’ monthly payments so they can keep their homes.

But Democrats surrendered other cherished goals: letting judges rewrite bankrupt homeowners’ mortgages and steering any profits gained toward an affordable housing fund.

It was Obama who first signaled Democrats were willing to give up some of their favorite proposals. He told reporters Wednesday that the bankruptcy measure was a priority, but that it “probably something that we shouldn’t try to do in this piece of legislation.”

“It’s not a bill that any one of us would have written. It’s a much better bill than we got. It’s not as good as it should be,” said Democratic Rep. Barney Frank of Massachusetts, the House Financial Services Committee chairman. He predicted it would pass, though not by a large majority.

Frank negotiated much of the compromise in a marathon series of up-and-down meetings and phone calls with Paulson, Dodd, D-Conn., and key Republicans including Gregg and Blunt.

Pelosi shepherded the discussions at key points, and cut a central deal Saturday night — on companies paying back taxpayers for any losses — that gave momentum to the final accord.

An extraordinary week of talks unfolded after Paulson and Ben Bernanke, the Federal Reserve chairman, went to Congress 10 days ago with ominous warnings about a full-blown economic meltdown if lawmakers did not act quickly to infuse huge amounts of government money into a financial sector buckling under the weight of toxic debt.

The negotiations were shaped by the political pressures of an intense campaign season in which voters’ economic concerns figure prominently. They brought McCain and Obama to Washington for a White House meeting that yielded more discord and behind-the-scenes theatrics than progress, but increased the pressure on both sides to strike a bargain.

Lawmakers in both parties who are facing re-election are loath to embrace a costly plan proposed by a deeply unpopular president that would benefit perhaps the most publicly detested of all: companies that got rich off bad bets that have caused economic pain for ordinary people.

But many of them say the plan is vital to ensure their constituents don’t pay for Wall Street’s mistakes, in the form of unaffordable credit and major hits to investments they count on, like their pensions.

Some proponents even said taxpayers could come out as financial winners.

Gregg, R-N.H., said: “I don’t think we’re going to lose money, myself. We may — it’s possible — but I doubt it in the long run.”

Highlights of $700 billion financial system rescue



By Associated Press

Following are the major details of the $700 billion rescue package that congressional negotiators approved on Sunday:

-- Provides up to $700 billion, starting with an initial $250 billion, to allow the Treasury Department to purchase troubled assets, mainly in the area of mortgages, that are weighing down the U.S. financial system.

-- Gives the Treasury Department, working with experts chosen by the government, the authority to fashion the asset purchase program. Treasury officials have suggested that a key approach will be the use of “reverse auctions” in which financial firms who succeed in selling their assets to the government will be the ones willing to take a lower price than other bidders.

-- Restrictions will be imposed on the pay and benefits received by executives whose companies are selling some of their bad assets through the government’s purchase program.

-- The Treasury would be required to provide details of its purchases within two days of the transactions and various oversight boards would be created to monitor the operation of the program.

-- Taxpayers would be given ownership stakes in companies whose bad assets are purchased. After five years, if the government is facing a loss in the program, the president will be required to submit a plan recommending how the money can be recouped from financial companies.

-- Establishes a program whereby banks could buy government insurance that would cover the principal and interest on certain troubled assets, rather than selling them outright. Premiums will vary depending on the assets’ risk profile.

Take a look
Secretary of the Treasury Henry Paulson, center, Speaker of the House Nancy Pelosi, D-Calif., left, and Senate Majority Leader Harry Reid, D-Nev., right, announce a tentative deal on legislation regarding the financial crisis on Sunday, Sept. 28, 2008 on Capitol Hill in Washington. (AP Photo/Lauren Victoria Burke)
Senate Republican lead negotiator Sen. Judd Gregg, R-N.H., left, and Senate Banking, Housing, and Urban Affairs Sen. Christopher Dodd, D-Conn., speak with reporters about the financial crisis Sunday, Sept. 28, 2008, in Washington. (AP Photo/Evan Vucci)
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Reader comments on this story - 37 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

tatbtime wrote on Sep 29, 2008 10:57 AM:

" I agree with real american. Thanks, well said. "

tnz650 wrote on Sep 29, 2008 10:44 AM:

" On Saturday night at 11:30PM, our representatives on Capitol Hill held a little love fest and announced that (in principal) they had come to an agreement on the "bail out" package. Representatives of the House and Senate, along with Treasury Sec Paulsen, came out smiling and joking and congratulating each other on their agreement. Now, maybe I missed something in all this, but I can't imagine that this is anything to celebrate, joke about and congratulate each other on. But this is how the people who are representing us are handling it. And the fact that they can stand there with Sec. Paulsen, the former CEO of Goldman Sachs, one of the persons instrumental in the creation of these debt obligations that have gotten the investment banks into so much trouble, they can stand there and actually THANK him for what he's done. Goldman Sachs will be the FIRST in line for this multi-billion dollar hand out. Paulsen shouldn't be thanked; he should be thrown in jail. Time to take a serious look at voting for a different party. "

FollowTheConsitution wrote on Sep 29, 2008 10:23 AM:

" WASHINGTON — The Federal Reserve and other countries' central banks announced new steps Monday that makes billions of dollars available to squeezed banks here and abroad to battle a worsening credit crisis that threatens to unhinge the U.S. economy.

The Fed said the action is intended to "expand significantly" the availability of cash available to financial institutions in an effort to provide relief to the worst credit crisis since the Great Depression. In taking the action, the Fed cited "continued strains" in the demand for short-term funding.

Central banks will continue to work closely and are prepared to take "appropriate steps as needed" to stem the fallout, the Fed said. "

Jarhead71 wrote on Sep 29, 2008 10:22 AM:

" Nancy Pelosi, you and all of those that support this are not being honest with the American people. But you don't care about that do you? You know where your bread is sliced and buttered. Our country is going down the tubes, all you did with this is make that slide faster. You took the opportunity to make that single digit approval rating of the Congress and turned it into a negative number. Good job! Can you prig, arrogant Congress members sleep with yourselves at night? "

FollowTheConsitution wrote on Sep 29, 2008 10:14 AM:

" Next step is for the bigger banks to buy up all the other banks.

Citigroup is taking of Wachovia.

After these bigger banks acquire all these other banks and after the economy crashes this will make easier for the government to swoop in and take over the few bigger banks remaining. The government is going to own everything! "

FollowTheConsitution wrote on Sep 29, 2008 10:10 AM:

" The sad thing is we were all being warned about this and we all just ignored it!

Go to google and type in...."america to fascism"

Watch Aaron Russo's film. You can watch it online. It's about 90 minutes.

This will expose everything going on and why this happening today! "

FollowTheConsitution wrote on Sep 29, 2008 10:07 AM:

" The government take over has begun!

They are printing up money they don't have. Using that worthless paper to acquire all the assets of these corporations. Then after the corporations start to crumble the government takes over.

What a scam! The government is basically stealing the corporations by paying for it with play money! After the corps can't make good on this play money loan and continue to crumble the government just steps in for the easy take over!

Kiss your freedoms goodbye! "

FollowTheConsitution wrote on Sep 29, 2008 10:03 AM:

" The Audit Committee of the Board of Directors of AIG has determined that delay necessary in securing shareholder approval prior to the issuance of the Preferred Stock would seriously jeopardize the financial viability of AIG. Because of that determination, the Audit Committee, pursuant to an exception provided in the NYSE’s Shareholder Approval Policy for such a situation, expressly approved AIG’s omission to seek the shareholder approval that would otherwise have been required under that policy. The NYSE has accepted AIG’s application of the exception.

AIG, in reliance on the exception, is mailing to all shareholders a letter notifying them of its intention to issue the Preferred Stock without seeking their approval. AIG will proceed to issue the Preferred Stock when it has received all material approvals of governmental authorities required for the issuance "

FollowTheConsitution wrote on Sep 29, 2008 10:03 AM:

" On September 23, 2008, American International Group, Inc. (“AIG”) announced that it had signed a definitive agreement with the Federal Reserve Bank of New York for a two-year, $85 billion revolving credit facility. Under the agreement, AIG will issue a new series of Convertible Participating Serial Preferred Stock to a trust that will hold the Preferred Stock for the benefit of the United States Treasury. The Preferred Stock will hold approximately, but not in excess of, 79.9% of the aggregate shareholder voting power. The issuance of the Preferred Stock, which will be convertible into Common Stock of AIG following a special shareholders meeting to amend AIG’s restated certificate of incorporation, would normally require approval of shareholders according to the Shareholder Approval Policy of the New York Stock Exchange (the “NYSE”). "

pseudo-intellectual wrote on Sep 29, 2008 9:55 AM:

" If you're looking for a cool, calm, rational mind in the current crisis, many would turn to Warren Buffett for his opinion. In fact he is one of those consulting with Congress. He is no friend of Bush and the Republicans (I suspect he despises them), and I'm sure the need for a bailout turns his stomach... but even Buffett says this is the only way to avoid the worst financial meltdown in our history. We are talking about a "greater" Depression here... "

FollowTheConsitution wrote on Sep 29, 2008 9:52 AM:

" This is not a buy in! That is just BS being fed to the people.

This is about government take over to control all the big corporations!

This whole thing was a set up by the government to take everything over and they are feeding the people a line of BS!

The Federal Reserve just announced how other central banks are doing the same thing! This country will be owned by a small handful of private banks that want control over everything. "

FollowTheConsitution wrote on Sep 29, 2008 9:47 AM:

" Federal Reserve announced other central banks are injecting cash into the market.

This entire thing smells of government take over of major companies worldwide!

This is simular to when they fooled Americans when they ratified the 16th amendment, then at the same time started the Federal Reserve and created the personal income tax hoax on the people!

Now the bankers are wanting control of the all the corporations!

People you need to WAKE UP! This entire thing is a scam on the American people by our government! "

Lloyd Dobler wrote on Sep 29, 2008 9:23 AM:

" Heaven help us all if this actually passes as is. As I understand it, the government is permitted to buy in to these organizations with no provision that requires them to sell back out once the organizations are once again stable. They've done such a bang-up job with Social Security and Medicare--does anyone truly believe that the government buying into our financial system is a good thing? And how does Hank Paulson still have a job? "

pseudo-intellectual wrote on Sep 29, 2008 9:19 AM:

" This is the direction we've been heading for years. You people are irate about the government taking over the banking industry but you're okay with government taking over other things, like healthcare. Pro-Choice people are fond of telling government to "stay out of the bedroom," but here in Illinois our state government passed a law requiring carbon monoxide detectors in our bedrooms, but did we complain about that? Let's face it- more and more of us want someone to watch over us and take care of us from the cradle (if we get that far) to the grave. You can't have it both ways. "

markets work wrote on Sep 29, 2008 8:43 AM:

" This is not about credit nor fixing the economy. This is about the government buying businesses. The markets are over inflated and need a correction. This bailout only perpetuates the problem and puts us even deeper in SOCIALISM. Let the market correct this and we will be fine. Let this bailout go through and we will collapse this economy. "

kcmoore5 wrote on Sep 29, 2008 8:20 AM:

" In answer to your question Beowulf.... To bad. We have no say in any of this. This "the sky is falling mentality" is a total crock. A bunch of fat cats are deciding where OUR money is spent. All of the leading economists say this is a band aid and when we finally pull it off, (even with the 700 billion) it's gonna be painful. I say pull it off ! No bail out package. They said the market would crash last week if they didn't get the bill signed... Hmmmmm I see no crashing.... "

the_goat wrote on Sep 29, 2008 8:14 AM:

" If this is such a "good deal" for the American People... why aren't private investors buying it?

I think we're at a point that we have the technology to let every voter voice his/her opinion on the matter. Why can't we hold a vote? I pay my bills, I don't take out loans for more than I can afford, so why do I have to bail those other people out? "

Seymour Butz wrote on Sep 29, 2008 8:10 AM:

" Check out section 110 of the bill. It seems that consumers who made bad choices may have either their principle or interest rate lowered. What about rest of us who paid off or are paying on their mortgage every month? I guess our check is in the mail. "

American wrote on Sep 29, 2008 7:46 AM:

" A buy in, I'm not buying it. From what I read, they get to spend half of it, and the half will need pork in it to pass.

Has any one ever heard of Capitalism? If you try to get rich quick/easy then you should pay the price when you fail. Any plan to bail out the bankers/high risk borrowers should be dead. Let the market correct is self, better pain now than delaying greater pain down the road. "

Not so Political wrote on Sep 29, 2008 7:10 AM:

" I hope when my business has trouble they will baol it out also. Wait I can take all the profits, gets some large dollar loans than not pay them. Then they will come bail me out also. "

Jarhead71 wrote on Sep 29, 2008 6:33 AM:

" I want to see who voted YES on this. I agree with Dave, no matter what you call it, this is just WRONG. The Congress is no longer representing the citizens of the USA, but rather the corporate banks, insurance corporations and big oil. It is time for change in Washington, DC! NO more incumbents! If they do not listen to our phone calls, emails and letters, perhaps they will listen to our votes in November. If that doesn't work, perhaps they force us into the next step and then the next until the citizens get our government back and start following the Constitution again. "

Pontiac resident wrote on Sep 29, 2008 5:53 AM:

" Congress could give every person in America, over 18 years of age, $250,000 with this size of a deal and fix the American economy, fast. But instead, they'll give it to those selfish snobs on Wall Street and they'll waste it again! Let Wall Street and the greedy bankers fall on their faces, give this money to the working people of this country, the people who've pay taxes and lost their jobs to greed of those in power. "

Dollarette wrote on Sep 29, 2008 5:46 AM:

" 1. The government will control businesses. Russia?
2. Foreclosures will slow up, due to government help. What help will those who have already foreclosed on get? Is it going to be OK now to foreclose, because Uncle Sam will help out? I think my crystal ball sees more foreclosures, from people who now will know they'll get "bailed" out.
3. Can we all say Big Brother?
4. Congress can decide something of this magnitude in a week or so, but can't decide to pass laws against pedophiles, rapists, murderers for months, and sometimes years. Wow, thanks, now we know the true heart of Congress. Gobbling up American businesses-ok, killing & raping a child-well, we need to think about it for a while, you know, killers have rights, too.....
For those who don't get it, that was sarcasm. "

JMK wrote on Sep 29, 2008 5:20 AM:

" Again the "boomers" make sure that they have the most comfortable existence of any generation in the history of the world... the fact that it is at the expense of their children and grandchildren is of no consequence. "

real american wrote on Sep 29, 2008 4:43 AM:

" Call it whatever you want. It still socialism, and anybody that supports it is wrong, including our President. These companies should have been allowed to fall, and the market would have corrected itself. "

Prairie Loon wrote on Sep 29, 2008 3:19 AM:

" Nothing Congress ever does benefits ordinary Americans. Ordinary Americans are screwed coming and going anymore. This was the case before this travesty and it will be after this travesty. What a useless, fruitless institution Congress has become. "

Dave wrote on Sep 29, 2008 2:46 AM:

" For DavesGirl: Supply and demand work. If there is a need for a product or service, someone, somewhere in this county will fill that need. It doesn't have to be done by a large company or even a small company.
Someone has a truck to transport thing, Someone else has a shop in which to build things. Another raw materials and supplies. Someone has money or gold to loan.
We don't need the system that's in place in order to survive. It needs to be buried. The funeral will cost and many will suffer but in the long run we will be better off. "

Annienap wrote on Sep 29, 2008 2:17 AM:

" American taxpayers have gotten screwed AGAIN no matter which way it goes. I don't think the taxpayers will ever get a 'return' on their 'investment'- that's all B.S. All I see that we can do is vote out everyone who votes FOR this. There is one positive that is coming out of this mess - the American people are finally finding their voices and speaking out by calling their congressmen. "

Dave's Girl wrote on Sep 28, 2008 11:30 PM:

" The bailout sucks! However, we also cannot let the credit market freeze up. When is the last time you or anyone you know paid for a car with cash? I bet you pull out the ole credit card every time you buy anything over a couple hundred bucks! No credit = no major purchases. This also works on the business level. Tons of retail companies use credit to buy their inventory. They pay it back after the inventory is sold. If they cannot buy new inventory, sales will plummet - jeopardizing many jobs. Think about retailers around Christmas - they use credit to stock supplies, then make the money during the holidays. Anyway folks...no credit is a bad thing. Perhaps many think it is a poison pill we must swallow. I don't know...perhaps we can fix it without a depression. "

Dave wrote on Sep 28, 2008 10:49 PM:

" Bail out, rescue, buy out, buy in or whatever! It still reeks. Letting our politicians know what we think has worked so far. We batter keep the switchboard lit up Monday.
My Congressman is Ray LaHood. You can call directly to his Washington office at 202-225-6201 and speak with one of his aids. He also has local offices in Peoria, Springfield and Jacksonville. I plan on visiting two of them today.
If you care, do the same thing to your congressman. "

observation8 wrote on Sep 28, 2008 10:28 PM:

" where's the investigation? Funny to see Chris Dodd's picture on this--he got sweetheart deals from Countrywide. Check out how many politicians got huge campaign contributions from Fannie Mae and Freddie Mac. We are being screwed over by Washington again. And we just keep taking it. Call your Senator and Congressman...or better yet, vote them out! "

OGS wrote on Sep 28, 2008 9:49 PM:

" To hell with the bail out, instead set bail for the crooks who created the mess in the first place. A buy in is a gambling term. How soothing. "

beowulf wrote on Sep 28, 2008 8:42 PM:

" If this passes, I will take every dime I have out of the bank and put it somewhere in my home. I've already told my congressmen the same thing. I encourage others to do the same. "

truthiness wrote on Sep 28, 2008 7:59 PM:

" This isn't a bailout. It's the US taxpayers buying a ticket on the Titanic. Lifeboats only available for the super rich! "

beowulf wrote on Sep 28, 2008 7:56 PM:

" What if We The People don't want to "buy-in"??? "

JMK wrote on Sep 28, 2008 7:49 PM:

" Bama Yankee: High risk, high reward.... very high risk. "

Bama Yankee wrote on Sep 28, 2008 6:19 PM:

" If this is a buy in, explain to me why anyone in their right mind would buy stock in a company on the verge of bankruptcy? "
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