Congress Gropes With U.S. Financial Crisis Members of Congress are mulling their role in the aftermath of this week's turbulence on Wall Street. A consensus is emerging among Democrats that financial markets need more regulation. But in the short term, they're more focused on proposals to — as one put it — bail out the middle class.
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Congress Gropes With U.S. Financial Crisis

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Congress Gropes With U.S. Financial Crisis

Congress Gropes With U.S. Financial Crisis

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STEVE INSKEEP, Host:

The tough economy is meeting up with tough politics on Capitol Hill. A lot of rhetoric, not so much action, because lawmakers are not sure what they should do, or even what they can do. NPR's Brian Naylor reports.

BRIAN NAYLOR: Congressional leaders from both parties sat around a conference table in a small room off the Senate floor Tuesday night to hear the dramatic news from Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. The government was about to bail out insurance giant AIG with an $85 billion loan. It was a sobering moment for lawmakers. And as they watched the fall of Wall Street titans this week, it's clear that the way forward for Congress is uncharted. Senate Majority Leader Harry Reid.

HARRY REID: No one knows what to do. We are in new territory here. This is a different game. We're not out here playing soccer, basketball, or football. This is a new game, and we're going to have to figure out how to do it.

NAYLOR: For Republicans, it's a sensitive time. The deregulation of the financial markets that many blame for the turmoil on Wall Street largely occurred under GOP control of Congress. Republican Senator Jim DeMint of South Carolina said Americans should be very concerned by the size and frequency of these government bailouts. Senate Minority Leader Mitch McConnell said bipartisan solutions are called for.

MITCH MCCONNELL: Now, more than ever, is the time to rise above politics and to work together. Our constituents don't want campaign speeches and hyper-partisan accusations. They want security for their homes and for their savings.

NAYLOR: But Democrats are not so eager to let Republicans off the hook in an election year in which the economy has emerged as the overriding issue. Democratic Senator Dick Durbin of Illinois took aim at former Republican Senator Phil Gramm, a chief proponent of deregulation during his time in Congress who lately has served as economic adviser to another onetime champion of deregulation, John McCain.

DICK DURBIN: The era of Phil Gramm deregulation is an era that has not only declined, but fell over the last several weeks. That may have inspired John McCain years ago, but that cannot lead our country in the future.

NAYLOR: One proposal for dealing with Wall Street's new reality is Massachusetts Democrat Barney Frank's idea for a new government agency to take over the troubled parts of struggling companies. Frank's Financial Services Committee will also look into the Federal Reserve Board's authority to buy AIG. Frank says Fed Chairman Bernanke told him he has $800 billion available for such purposes.

BARNEY FRANK: No one in a democracy, unelected, should have $800 billion to dispense as he sees fit. He can under this law. We inherited it from the Depression, but it had not previously been used this way. He can make any loan he wants under any terms to any entity or individual in America if he thinks it's economically justified.

NAYLOR: Congress plans to leave Washington by the end of next week, perhaps for the year. In the short term, Democrats are considering measures to boost the middle class, either in the form of a second stimulus package or attached to a measure that will fund the government for the rest of the year. Among the items under consideration are extending unemployment benefits and money to repair roads and bridges. One other item lawmakers are likely to take up is another bailout, or as House Speaker Nancy Pelosi prefers to call it, an investment in the form of a $25 billion loan guarantee to help the ailing auto industry retool to make more fuel-efficient cars. Brian Naylor, NPR News, the Capitol.

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