Reid: Congress Won't Rubber Stamp Bailout Plan

The White House is pressuring Congress to pass a $700 billion rescue package for the financial sector. Senate Majority Leader Harry Reid said the Bush administration's proposal is a starting point but by no means is the final product. Democratic lawmakers say they want to include more oversight, bankruptcy changes and executive pay caps.

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STEVE INSKEEP, Host:

It's Morning Edition from NPR News. Good morning, I'm Steve Inskeep.

LINDA WERTHEIMER, Host:

And I'm Linda Wertheimer. President Bush's $700 billion plan for taxpayers to buy Wall Street's bad debt is before Congress today. Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke are talking about the plan with a Senate committee this morning, and lawmakers are pouring over the details. Democrats say the administration will have to take some changes if it wants a bill soon. NPR's Brian Naylor reports.

BRIAN NAYLOR: The Democrats' case was laid out by Senate Majority Leader Harry Reid who said Congress was not about to rubber stamp the Bush administration's proposal.

HARRY REID: The Bush administration bill is a starting point, but by no means a final product. Democrats believe that there should be protection for the taxpayers for footing the bill for this legislation. That begins with more oversight, more transparency, more accountability, and more controls to prevent conflicts of interest.

NAYLOR: Democrats are writing their own plan, a draft of which was given to reporters yesterday. A key change pertains to oversight. The administration proposed nothing more than twice a year reports on what it was doing with its authority to buy bad debt from troubled financial institutions. Democrats proposed establishing an oversight board requiring monthly reports and annual audits.

The administration says it's willing to go along with the additional oversight, but the Democrats' other demands remain sticking points. Democrats want to give bankruptcy judges the authority to rewrite the mortgages of homeowners at risk of foreclosure, arguing it's these bad loans that have led to the near meltdown on Wall Street. Massachusetts Democrat Barney Frank chairs the House Financial Services Committee.

BARNEY FRANK: This seems to us an opportunity to reduce foreclosures. We've been telling them how to do that, but mostly we have been urging the private sector to do it in trying to incentivize them to do it. We'll now own a lot of these mortgages. So we will clearly be redoing the foreclosure.

NAYLOR: Another Democratic demand is to cap executive pay at banks where the government intends to buy the bad loans. Democratic Senator Barbara Mikulski of Maryland says Wall Street CEOs deserve the same treatment as laid-off steelworkers.

BARBARA MIKULSKI: No golden parachutes. Let them feel the hard landing that my constituents faced when they were laid off at Bethlehem Steel. Let them feel the hard landing of knowing what it's like to have your mortgage foreclosed upon. Let them feel the hard landing that my constituents are facing right now.

NAYLOR: The administration opposes the Democrats' pay cap and foreclosure demands, but Democrats believe they have the upper hand. Republicans, meanwhile, are clearly uncomfortable with the administration's proposal to intervene in the markets. So far, GOP leaders in the House and Senate have said they'll support it, if only because, they say, there's no choice. Senate Minority Leader Mitch McConnell.

MITCH MCCONNELL: Republicans have many serious questions about this plan. But this is the only concrete plan we've seen so far that aims to protect Americans on Main Street, to protect their homes, their savings, their retirement plans, to protect endangered jobs and small businesses.

NAYLOR: But others in the GOP are balking. The top Republican on the Senate Finance Committee, Alabama's Richard Shelby, called the administration plan neither workable nor comprehensive. And some conservatives like Indiana Republican Mike Pence promised to vote no.

MIKE PENCE: We simply cannot increase the national debt by nearly a trillion dollars without expecting the American people's ire and ultimately without expecting a massive tax increase in the near future.

NAYLOR: Still the administration says it's confident Congress will pass a bill to its liking by the end of the week. Brian Naylor, NPR News, the Capitol.

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Correction Oct. 9, 2008

In some versions of this story, we mistakenly identified Richard Shelby as the top Republican on the Senate Finance Committee. He is actually the ranking member on the Senate Banking Committee.

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