Corporate Governance

Rep. Spencer Bachus, the ranking member on the Financial Services Committee, just said on the House floor that he will vote for the revamped financial bailout bill.

The Alabama Republican said it is the most difficult vote in his 16 years.

He said the risk of not acting is greater than the risk of doing nothing.

Following his speech, members applauded Bachus.

Office of Management and Budget Director Jim Nussle is urging House Minority Leader John Boehner (R-Ohio) to back the $700 billion bailout deal.

In a letter to Boehner sent Sunday, Nussle, a former GOP House member from Iowa, echoes the arguments made by the Bush administration. He says that the measure may be needed to prevent a fiscal breakdown and that it minimizes taxpayer risk.

Read it below.

Dear Leader Boehner,

I am writing to address concerns expressed about the impact of the pending financial rescue bill on the federal budget. As you know, the legislation authorizes a purchase program that allows the federal government to hold up to $700 billion in mortgages or mortgage-backed securities, and creates a program to allow federal guarantees as an alternative to direct purchases.

The $700 billion figure is substantial, of course, but the size of the problem in our financial markets requires a commitment of this size. For several reasons, however, the impact on the taxpayer will be considerably less than $700 billion.

The most important point is that the bill is not simply authorizing new spending. It authorizes the purchase of assets that, over time, will produce income and can eventually be sold. No one knows just how much these assets will sell for, but since 90 percent of mortgages are currently being paid on time and in full, we can expect a substantial payback on our investment. In some cases, if a mortgage asset is purchased at a deep discount from its face value, the taxpayer may even see a positive return on that investment.

Likewise, the guarantee program authorized in the bill is designed to be self-funded, by charging an insurance premium to cover any expected losses. When the government enters into guarantees on mortgage-related assets, the $700 billion limit for direct purchases will be reduced accordingly.

In addition, the bill authorizes the Secretary of the Treasury to accept warrants for stock in distressed financial companies, which may later be sold at a profit. Lastly, although government budget scoring does not allow us to consider macroeconomic effects, it is very likely that the financial rescue bill will prevent a devastating breakdown in our financial markets. As a result, we are likely to see higher federal revenues than would be the case without the legislation, further mitigating its cost.

I appreciate the effort you and your colleagues have devoted to considering and improving the Administration

Senate Republican Conference President Lamar Alexander (Tenn.) has issued a statement praising the "breakthrough" plan reached late Saturday night between House and Senate negotiators to rescue Wall Street.

Alexander's statement:

"Congress has significantly amended the Paulson plan to protect the taxpayer and get our economy moving again. If the House passes the legislation Monday, then the Senate should also act Monday so that Americans will be able to cash their paychecks, get mortgage and car loans, obtain student loans, and keep their jobs. The bill gives the Treasury secretary the authority he needs with strict oversight. And it minimizes the risk of loss to taxpayers and ensures that annual profits from the transactions go to reduce the federal debt."

New Hampshire Republican Sen. Judd Gregg, a key participant in Saturday's late-night bailout negotiations, said Sunday afternoon that both presidential candidates played a part in the deal that was reached and that final congressional votes are likely Monday.

Gregg, the ranking Republican on the Senate Budget Committee, also said negotiators Saturday night were told in no uncertain terms from leading economists that a meltdown on Wall Street was imminent if the Bush administration's $700 billion plan was not approved as soon as possible.

"Getting this done soon, promptly, is absolutely critical to the confidence of the markets," Gregg said. "I can't understate that issue."

Both Democratic presidential nominee Barack Obama and GOP nominee John McCain were in close contact with the lead negotiators throughout the nine-hour session Saturday afternoon and evening, Gregg said, and he confirmed media reports that economists' perspectives were sought as well.

On other key points, Gregg said:

Senate Republican leaders delivered a balanced, noontime update on progress towards a Wall Street bailout bill, saying they are optimistic an agreement will be reached later today but also warning of dire consequences with Monday's stock market opening if an agreement falls through.

Senate Minority Leader Mitch McConnell (R-Ky.) and ranking Budget Committee member Judd Gregg (R-N.H.) said that a Saturday afternoon meeting is planned for the principal negotiators, House Minority Whip Roy Blunt (R-Mo.), Senate Banking Committee Chairman Chris Dodd (D-Conn.), and House Financial Services Committee Chairman Barney Frank (D-Mass.), along with Bush administration officials from the Treasury Department.

"We expect to have an agreement," Gregg said. "The basic understanding is that when we get in that room as principals, we're going to stay there until we reach an agreement. If we can't reach an agreement, which hopefully won't happen and I don't expect that to happen, we will stay until we've done something to address this issue in a very comprehensive way.... We've agreed to stay until we get this done."

Gregg said if an agreement is not reached by the end of the weekend, "by Monday or Tuesday, Main Street America will be under dire stress."

McConnell added, "The goal would be to announce an agreement tomorrow and have a vote on Monday."

A Monday vote could possibly be the last action by the 110th Congress before the November elections, although Senate Majority Leader Harry Reid (D-Nev.) late Friday said he also wants votes on a train safety bill, a Defense Department policy measure and a U.S.-India nuclear agreement.

-J. Taylor Rushing

The Senate on Saturday got off to a smooth start by approving a procedural motion on a funding measure for the federal government and announcing progress on talks toward a $700 billion financial stabilization plan for Wall Street.

Senators voted 83-12 to invoke cloture on a $630 billion continuing resolution to fund the government, which was necessary before the fiscal year ends on Tuesday. The Senate will vote this afternoon on the continuing resolution.

Sen. Mary Landrieu (D-La.), seeking a separate vote on a $1.1 billion agricultural and environmental aid bill for Southern states hit hard by recent natural disasters, had threatened to force the funding vote to Sunday. But she relented talks after talks Democratic leaders. A vote on Landrieu's bill is now likely to come during a lame-duck session, her office said.

Reid said House and Senate negotiators worked until 3 a.m. Saturday on the bailout bill talks, and a final vote is hoped for by early Sunday.

"We may not be able to do that, but we're trying very hard," Reid said. "If we are going to be able to do what it appears we can do, it will resolve a lot of questions that people have around the country."

-J. Taylor Rushing

Senate Majority Leader Harry Reid (D-Nev.) announced on the Senate floor late Friday that congressional negotiators are aiming for an early Monday morning final vote on a Wall Street bailout bill, assuming agreement on the $700 billion package could be reached this weekend.

While those talks continue, Reid said the Senate will vote at 10 a.m. Saturday on a motion to proceed to a continuing resolution to fund the government, with a 30-hour post-debate period possibly to follow before a final vote on the stopgap funding measure

Just 30 percent of U.S. adults support the Bush administration's proposed $700 billion bailout plan, according to an Associated Press-Knowledge Networks poll.

More people -- 45 percent -- said they oppose the plan, and 25 percent said they were undecided.

But a majority of adults, 57 percent, said that a bailout plan is needed to prevent a serious recession. Just 35 percent, however, said that the proposal would solve the financial crisis.

The poll was conducted via telephone calls and Internet surveys on Thursday, the day lawmakers' talks on the bailout collapsed.

House Financial Services Committee Chairman Barney Frank (D-Mass.) is blaming House Republicans for the collapse of talks over the economic bailout, saying that they came up a surprise proposal at the last minute.

"To our surprise, yesterday, the House Republicans came up with their own entirely now plan, and it is a -- an ambush plan," Frank said on CBS Friday. He added that no Republican who backs that plan had mentioned it to Treasury Secretary Henry Paulson or Federal Reserve Chairman Ben Bernanke during meetings about the proposed $700 billion bailout on Capitol Hill this week.

While the proposed bailout calls for government money to buy up bad mortgage assets, the Republican plan relies on private equity to create an insurance system for the firms with those assets.

Frank, Democrats and Senate Republicans have worked with the Bush administration on the bailout deal, but House Republicans have had held it up over objections to increased federal intervention in markets.

Frank blamed the GOP dissension for slowing progress on a rescue package, which its supporters said is needed to prevent a credit crunch and serious economic woes.

"I didn't know I was going to be the referee of the internal Republican ideological civil war," Frank said. "Look, you could have designed, in aspect, a better plan. But when you have a party in power, President Bush's people, and his top economic advisers, the head of the Federal Reserve and the secretary of the treasury say, look, we're going to be a crisis if you don't do this quickly."

In the same interview, Sen. Richard Shelby (R-Ala.), an opponent of the proposed $700 billion bailout, said that adopting it would be a "big mistake."

"It does nothing basically for the stressed mortgage payer," he said. "It does a lot for three or four or five banks, including foreign banks, and I have with me right here over -- a list of over 200 of the top economists in this country that say this structure, the Paulson plan, is a bad plan."

Shelby said that Congress has time to consider other plans.

"Well, let's say that we did nothing, the markets would correct themselves," he said.

Congressional leaders announced Thursday that they have a tentative bailout deal in place.

"We've reached a fundamental agreement on a set of principles," said Sen. Chris Dodd (D-Conn.), the chairman of the Senate Banking Committee.

Dodd was joined at a news conference by Sen. Robert Bennett (R-Utah), also a member of the Senate Banking Committee, House Financial Services Committee Chairman Barney Frank (D-Mass.), and House Financial Services Ranking Member Spencer Bachus (R-Ala.).

Dodd said that while Treasury Secretary Henry Paulson will get the authority and funding he needs to act, the agreement includes "effective oversight" of how the bailout will be executed and addresses issues for struggling homeowners and pay for executives of companies that will benefit from the plan.

Dodd, however, did not go into details, saying that the deal still had to be taken to Democratic and Republican members in both chambers.

"We'll obviously be talking to our respective leadership as well. But we're very confident that we can act expeditiously. We think we've done a good job in arriving at that," Dodd said.

Bennett said the he expects that the bill will pass the House and the Senate and that the president will sign it.

Frank agreed: "And, yes, we are on track, I believe, to pass this. The market should be calmed down."