Hill Clashes on Rescue Plan; Dollar Drags Down Markets

"If this is an investment, the taxpayer should not be treated as dumb money," said Rep. Rahm Emanuel (D-Ill.), chairman of the House Democratic Caucus. "If we're going to buy these securities that are illiquid, toxic, we need to make sure taxpayers get an equity ride so they get to benefit on the upside."

Another point of dispute is Democrats' insistence that the government be given authority to cut the salaries of executives and restrict their severance packages if they take taxpayer money. Paulson has said such a move would be "punitive" and deter companies from participating in the bailout.

But Republican resistance seemed to be collapsing yesterday after Sen. John McCain (R-Ariz.), the GOP presidential nominee, endorsed the idea, saying participating executives should be paid no more than the "highest-paid" government official. That official is the president, who makes $400,000 a year.

Rep. Louie Gohmert (R-Tex.) said the very idea of the bailout had so scrambled the usual free-market ideology of the GOP that few Republicans were willing to defend executives who receive million-dollar paychecks while their corporations receive billions of dollars in taxpayer funds.

"There's just something repugnant about that," Gohmert said.

Gohmert was among dozens of lawmakers who took part yesterday in two meetings called to protest the bailout. Participants ranged from liberals complaining that the Bush administration's plan would do too little to protect homeowners to conservatives such as Gohmert, who demanded a cap on spending.

"I don't think there's anybody in this room that would vote for" the Treasury proposal, said Rep. Brad Sherman (D-Calif.), a junior member of the Financial Services Committee who convened one of the meetings.

The second meeting was organized by Rep. Jeb Hensarling (R-Tex.), chairman of the Republican Study Committee, a group of more than 100 conservative lawmakers. In an effort to tamp down rank-and-file concerns, Paulson spoke by phone with Hensarling. Hours later, Hensarling's group issued a statement citing 10 "conservative concerns" with Paulson's proposal, including charges that it abandoned free-market principles and that it simply cost too much.

By last night, aides to the Republican Study Committee began collecting ideas to construct their own "free-market alternative" to the Paulson proposal.

As activists and other lobbyists weighed in on the plan, the pressures on lawmakers were reminiscent of those after the Sept. 11, 2001, terrorist attacks, when Congress, out of a sense of urgency, greatly expanded the executive's national security powers.

"All of a sudden, things are happening lickety-split, resulting in an enormous concentration of executive power the likes of which no one has seen in the financial area before," said Stephen Kroll, a professor at American University's School of International Service.

Consumer groups are pressing for a provision that would allow bankruptcy judges to modify mortgages for homeowners facing foreclosure, a move that could prevent up to 600,000 foreclosures over the next two years, according to Mike Calhoun, president of the Center for Responsible Lending.

Democratic leaders have voiced support for the idea, and Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) included it in draft legislation he presented yesterday to Treasury officials. But the idea is fiercely opposed by the banking industry and failed earlier this year to pass the Senate, leading many observers to dismiss it as a bargaining chip.

Staff writers David Cho and Ellen Nakashima contributed to this report.

2008 Washington Post