Debate Continues Over Financial Bailout; Parties Move Towards Middle Ground

Fri. September 26, 2008; Posted: 03:54 PM

(RTTNews) - Despite fiery rhetoric from some House Republicans that they would accept no deal that calls on the taxpayers to bail out financial institutions, some in the caucus are signaling there's middle ground to be found.

House Minority Leader Rep. John Boehner, R-Ohio, said Friday afternoon that he "would not agree to a bill that sells the taxpayers out to bail out Wall Street," following a meeting of House Republicans at which he was reportedly applauded.

Other Republicans speaking after the meeting took a similarly hard line. Rep. Thaddeus McCotter, R-Mich., told RTTNews the GOP conference was "extremely" united on that point.

"We're Republicans. We have run to protect taxpayers. In 2005 and 2006 we let them down. We learned our lesson and we're not going to do it again," he said in a brief interview.

The strong language comes after House and Senate Democrats, along with Senate Republicans, announced a deal Thursday to move forward based on a proposal by Treasury Secretary Henry Paulson. The proposal involves spending up to $700 billion to buy up troubled and illiquid assets from investment firms, including many mortgage-backed securities whose uncertain value is contributing to a credit crunch.

A working group of House Republicans proposed an alternative plan Thursday afternoon to replace the buyout with a government-backed insurance program that investment firms and banks would buy into to gain protection similar to the FDIC. The last-minute proposal lead to a breakdown of talks in advance of a White House meeting that some had hoped would prove a platform to announce an agreement in principle.

Rep. Barney Frank, D-Mass., the lead House Democratic negotiator on the deal, reacted angrily to the surprise announcement, claiming the sweeping alternative was never brought up for discussion during negotiations. He said that while he's not opposed to setting up an insurance program as part of a broader deal - even though Paulson said it wouldn't be a solution to the financial crisis facing the country - he couldn't back it as a replacement to the buyout.

Asked to react to Boehner's comments Frank said, "if that's his characterization of the Paulson and Bush [plan], if that's what he thinks about Paulson and [Federal Reserve Chairman Ben] Bernanke, we don't have a bill."

"Nobody objects to putting it in the bill, but that's not what Republicans are asking for," he said.

But Rep. Christopher Shays, a Republican whose Connecticut district encompasses many major financial firms, said that more than half of the House Republicans would back a buyout plan as long as it provided enough protections for taxpayers. He added that Republicans want to make sure that insurance is a tool that the next administration can use as the next treasury secretary may have a different view from Paulson about the utility of such a program.

He said his colleagues have said they would "vote for a plan that protects taxpayers even if it does some things we don't want in terms of market intervention."

Rep. Lee Terry, R-Neb., sounded a similar note, saying it was only a "small fraction" of Republicans who were insisting on the most radical approach.

"The rest of us want as many protections for taxpayers built in as possible," he said.

Leading Democrats in the House and Senate as well as rank-and-file members have also been calling for stricter taxpayer protection than initially proposed by the administration almost since the moment the plan was unveiled.

Asked by RTTNews if this situation reminded him of the push for comprehensive immigration reform, in which a deal worked out by Senate leadership and the White House stalled in the face of a Republican revolt, Terry said the situations were different.

He said the response to the financial crisis offers a lot more middle ground for negotiations to find.

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