WASHINGTON (AP) - Urgent efforts to lash together a $700 billion rescue plan for the national economy broke apart Thursday night, hours after key lawmakers had declared they had reached a deal.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sped to Capitol Hill to try to revive or rework the proposal that the administration says must be quickly approved by Congress to stave off economic disaster.
Congressional leaders were to meet with the economic chiefs into the night.
After six days of intensive talks on the $700 billion package urgently requested by the Bush administration, with Wall Street tottering and the presidential election nearing, there was more confusion than clarity.
A tentative accord in principle among influential Democratic and Republican lawmakers was announced at midday, giving the Bush administration just a fraction of the money it wanted up front, with half the $700 billion total subject to a congressional veto, congressional aides said.
But conservatives were still in revolt, balking at the astonishing price tag of the proposal and the heavy hand of government that it would place on private markets. Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement "is obviously no agreement."
Both of Congress' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also denied there was any deal. And the White House called the earlier announcement progress but also said it was reviewing the outline with more work needed to finalize a bill for Congress to rush into law.
There is wide agreement the U.S. economy is in peril, with financial institutions going under or near the edge and recession looming along with the resulting layoffs and increased home foreclosures.
There had been hopes for broad agreement, too, on a prescription by now, with a confident White House announcement by the president, John McCain, Barack Obama and congressional leaders.
But the best McConnell would say afterward was, "It's clear that more progress is needed and we must continue to work together quickly to protect our economy."
One group of House GOP lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions' sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the government purchase the assets. Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead.
Democrat Obama and Republican McCain, who have both sought to distance themselves from the unpopular Bush, sat down with the president at the White House for an hourlong afternoon session that was striking in this brutally partisan season—but also, according to one participant, "a full-throated discussion." By also including Congress' Democratic and Republican leaders, the meeting gathered nearly all Washington's political power structure at one long table in a small West Wing room.
"All of us around the table ... know we've got to get something done as quickly as possible," Bush told reporters, brought in for only the start of the meeting. Obama and McCain were at distant ends of the oval table, not even in each other's sight lines. Bush, playing host in the middle, was flanked by Congress' two Democratic leaders, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.
All the visitors left the White House without talking to a huge media group.
Under the accord announced hours earlier among key lawmakers, the Treasury secretary would get $250 billion immediately and could have an additional $100 billion if he certified it was needed, an approach designed to give lawmakers a stronger hand in controlling the unprecedented rescue. Aides described the details on condition of anonymity because they were not authorized to speak publicly.
The plan's centerpiece still is for the government to buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses, and lost jobs.
The Bush administration has made near-daily concessions to demands from the right and the left, among them a limit on pay for executives of bailed-out financial institutions and an equity stake in rescued companies for the government.
Despite the Republican outcry, Banking Chairman Chris Dodd, D-Conn., and Republican Sen. Bob Bennett, among others, said the negotiators from Congress and the administration had arrived at a deal that could win approval. Other key lawmakers said that after days of bare-knuckles negotiations there was little of note left to resolve.
Wall Street showed its pleasure—but the markets closed before the White House meeting and before the negative Republican comments started piling up. The Dow Jones industrials closed some 196 points higher, though that was down from larger gains earlier in the day.
Despite the national prominence of Bush, McCain and Obama, none has been deeply involved in this week's scramble to hammer out a package.
But the developments on the Hill lent fresh purpose to their White House session: the hope of providing bipartisan encouragement—and political cover—for lawmakers of both parties to accept a plan. Bush has asked that lawmakers approve a plan within days, before lawmakers adjourn to campaign for their own re-elections.
So far, though, there was still nothing to sell.
McCain, in particular, was being leaned on by Democrats and fellow Republicans alike to deliver GOP votes. Placating them enough to bring them in line could be a tall order for the Republican presidential nominee who has a checkered relationship with the right wing of his party.
Layered over the White House meeting was a complicated web of potential political benefits and consequences for both Obama and McCain.
McCain hoped voters would believe that he rose above politics to wade into successful, nitty-gritty dealmaking at a time of urgent crisis, but he risked being seen instead as either overly impulsive or politically craven, or both. Obama saw a chance to appear presidential and fit for duty, but was also caught off guard strategically by McCain's surprising gamble in saying he was suspending his campaigning and asking to delay Friday night's debate to focus on the crisis.