Congressional leaders and the Bush administration have reached a tentative deal on a landmark bailout of imperilled financial markets.
Outline for US bailout deal reached
WASHINGTON // The Democratic presidential hopeful Barack Obama and his Republican rival John McCain indicated today they were inclined to support the newly negotiated US$700 billion (Dh2.5 trillion) deal to bail out the financial industry. Mr McCain said he hopes to be able to support the tentative deal announced early today by Congress and the Bush administration, adding he wants to see the details first. "This is something that all of us will swallow hard and go forward with," Mr McCain said. "The option of doing nothing is simply not an acceptable option." Mr Obama said he is inclined to support the bailout because it includes increased oversight, relief for homeowners facing foreclosure and limits on executive compensation for chief executives of firms that receive government help. "None of those were in the president's provisions. They are identical to the things I called for the day that [Treasury] Secretary [Henry] Paulson released his package," Mr Obama said. "That I think is an indication of the degree to which when it comes to protecting taxpayers, I was pushing very hard and involved in shaping those provisions." Congressional leaders and the Bush administration reached the tentative deal on a landmark bailout of imperiled financial markets whose collapse could plunge the US into a deep recession. The House Speaker Nancy Pelosi announced the US$700bn accord just after midnight but said it still has to be put on paper. "We've still got more to do to finalise it, but I think we're there," said the US Treasury Secretary Henry Paulson, who also participated in the negotiations in the US capital. "We worked out everything," said Sen Judd Gregg, the chief Senate Republican in the talks. He said the House should be able to vote on it today, and the Senate could take it up tomorrow. The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price. At the insistence of House Republicans, some money would be devoted to a programme that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults. The legislation would place limits on severance packages for executives of companies that benefit from the rescue plan, but details were sketchy. Also, 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 requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes. The measure's main elements were proposed a week ago by the Bush administration, with Mr Paulson heading efforts to push it through the Democratic-controlled Congress. Democrats insisted on greater congressional oversight, more taxpayer protections, help for homeowners facing possible foreclosure, and restrictions on executives' compensation. To some degree, all those items were added. At the insistence of House Republicans, who threatened to sidetrack negotiations at midweek, the insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout. But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make credit sufficiently available. The department would decide how to structure the insurance provisions, said Sen Kent Conrad, one of the Democratic negotiators. Money for the rescue plan would be phased in, he said. The first $350bn would be available as soon as the president requested it. Congress could try to block later amounts if it believed the program was not working. The president could veto such a move, however, requiring extra large margins in the House and Senate to override. Despite the changes made during an intense week of negotiations, the heart of the programme remains Bush's original idea: to have the government spend billions of dollars to buy mortgage-backed securities whose value has plummeted as hundreds of thousands of Americans have defaulted on their home loans. The Senate majority leader Harry Reid, a Democrat, said on Saturday that the goal was to come up with a final agreement before the Asian markets opened on Sunday night. "Everybody is waiting for this thing to tip a little bit too far," he said, so "we may not have another day." Hours later, when he and others announced the plan, Mr Reid referred to the sometimes testy nature of the negotiations. "We've had a lot of pleasant words," he said, "and some that haven't always been pleasant." "We're very pleased with the progress made tonight," said White House spokesman Tony Fratto. "We appreciate the bipartisan effort to deal with this urgent issue." * AP