Frank sees bailout agreement by Sunday

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By JULIE HIRSCHFELD DAVIS and DAVID ESPO / The Associated Press

WASHINGTON — The Bush administration and Congress anxiously revived negotiations Friday on a $700 billion financial bailout, one day after the largest bank collapse in U.S. history provided a brutal reminder of the risks of failure. Democrats talked optimistically of agreement by the end of the weekend.

“I’m convinced that by Sunday we will have an agreement that people can understand on this bill,” predicted Massachusetts Rep. Barney Frank, a key Democrat in eight days of up-and-down talks designed to stave off an economic disaster.

House Speaker Nancy Pelosi added that “progress is being made,” although the day came and went without senior lawmakers from both parties sitting down together.

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Senate Banking Committee Chairman Sen. Chris Dodd., D-Conn., center, speaks during a news conference with, from left, Sen. Bob Corker, R-Tenn., Sen. Charles Schumer, D-N.Y., Sen. Robert Bennett, R-Utah, Sen. Judd Gregg, R-N.H., and Sen. Jack Reed, D-R.I., following a meeting on the market turmoil on Capitol Hill in Washington, Thursday. (AP)

Senate Banking Committee Chairman Sen. Chris Dodd., D-Conn., center, speaks during a news conference with, from left, Sen. Bob Corker, R-Tenn., Sen. Charles Schumer, D-N.Y., Sen. Robert Bennett, R-Utah, Sen. Judd Gregg, R-N.H., and Sen. Jack Reed, D-R.I., following a meeting on the market turmoil on Capitol Hill in Washington, Thursday. (AP)

Neither she nor Frank divulged details at a late-afternoon news conference in the Capitol, though there was word of one fresh Democratic concession.

Pelosi told fellow Democrats during a closed-door meeting that the idea of letting judges rewrite mortgages to help bankrupt homeowners avoid foreclosure won’t be a part of the emergency legislation. That provision, pushed by several Democrats, would be a deal-breaker for Republicans whose votes are needed to pass the measure, she said, according to lawmakers at the meeting.

Republicans sounded less upbeat about quick agreement after aides met at length in an attempt to clear the way for lawmakers to bargain over the weekend.

Meanwhile, fresh details emerged of a remarkably tumultuous White House meeting on Thursday. With the session breaking up in disarray, according to two participants, President Bush issued an appeal, saying, “Can’t we just all go out and say things are OK?” The group around the table, congressional leaders as well as presidential contenders John McCain and Barack Obama, spurned the presidential request for a publicly united front.

Earlier in the White House meeting, Democrats peppered House Republican Leader John Boehner of Ohio with questions about the details of an alternative he was backing. “I don’t know what the hell they are,” Bush said at one point,” recalled one person who was in the room. All the participants spoke on condition of anonymity, saying the meeting was private.

Bush sought to coax the talks back to life on Friday, prodding lawmakers in a morning appearance to “rise to the occasion” — and quickly.

In one small sign of progress, House Republicans dispatched their second-ranking leader, Rep. Roy Blunt of Missouri, to join the talks after their objections to an emerging compromise had brought negotiations to a standstill the day before. They also demanded “serious consideration” for a plan of their own, involving less government intrusion and lower cost to the taxpayers than the $700 billion that Treasury Secretary Henry Paulson has been seeking.

The legislation the administration is promoting would allow the government to buy bad mortgages and other sour assets held by investors, most of them financial companies. That should make those companies more inclined to lend and lift a major weight off the national economy that is already sputtering. But a significant number of lawmakers, including many House conservatives, say they’re against such heavy federal intervention.

Under their plan, the government would insure the distressed securities rather than buy them. Tax breaks would provide additional incentives to invest.

Democrats and Bush officials said the insurance proposal was acceptable as an option but not as a replacement for the administration’s more sweeping approach.

The crisis was hardly limited to the U.S.

Bush held a lengthy Oval Office meeting with British Prime Minister Gordon Brown that was focused on how the problems were spreading, then said, “I told him the plan is big enough to make a difference, and I believe it will be passed.”

Presidential politics weighed heavily and unpredictably on the election-season effort to stave off a full-blown economic crisis.

After announcing earlier in the week he would suspend his campaign and return to the capital until there was an agreement, Republican McCain abruptly reversed course and departed for Friday night’s debate with Democratic rival Obama.

There were fresh signs of urgency at both the White House and the Capitol, one day after the rancorous White House session and the collapse of Washington Mutual, the largest failure in U.S. banking history. The Seattle-based institution had invested heavily in the now-moribund mortgage market.

Still, the Dow Jones industrials rose 121 points for the day as investors anticipated a weekend agreement.

In days of negotiations, the administration has accepted demands from lawmakers to give Congress considerable authority to oversee the bailout. Additionally, Paulson relented to requests to limit the severance packages that corporate executives can receive from firms benefiting from the government bailout.

Also, rather than provide $700 billion upfront, as Paulson initially requested, Congress would approve the funds in stages. Under one approach, $250 billion would be made available at once, with the president able to certify the need for an additional $100 billion on his own authority. The final $350 billion would become available with a second presidential certification, although this time Congress would have authority to block it.

Any compromise is also expected to require the government to obtain partial ownership of any company it invests in.

Democrats, too, signaled they were considering jettisoning some of their own priorities.

Frank indicated they might ultimately drop a requirement that a portion of any profits from the rescue be funneled to a fund to build housing for low-income people. That mandate, deeply unpopular with Republicans, “is not an essential,” Frank said.

While Democrats control a majority of both the House and Senate, their leaders have made it clear they will not force their rank-and-file to vote without Republican support on a bailout advanced by an unpopular president on an unwilling public.

In an Associated Press-Knowledge Networks poll, only 30 percent of those surveyed expressed support for Bush’s package. An additional 45 percent were opposed, with 25 percent undecided. The survey was conducted Sept. 25 and had a margin of error or 3.8 percent. It was conducted over the Internet by Knowledge Networks, which initially contacted people using traditional telephone polling methods and followed with online interviews.

Aides to lawmakers in both parties say telephone calls from constituents are running heavily against the bailout — in some cases nearly 100-1 against, making the vote a potentially tricky one for a candidate in a competitive race.

Associated Press writers Charles Babington, Jim Kuhnhenn and Jennifer Loven contributed to this report.