Congress Scrambles to Seal the Deal

Congress worked feverishly Saturday to hammer out an economic rescue package, with hope still alive that there could be a deal soon, and FOX News reported that there are hopes of having a bill on the House floor by Sunday or early Monday, citing House Democratic sources.

Congress worked feverishly Saturday to hammer out an economic rescue package, with hope still alive that there could be a deal soon. FOX News reported that there are hopes of having a bill on the House floor by Sunday or early Monday, citing House Democratic sources.

This rescue plan is meant to resuscitate the U.S. financial system, parts of which have virtually shut down in recent weeks.

The market turbulence has been most evident in events like the bankruptcy of Lehman Brothers; the seizure by the Federal Deposit Insurance Corp. of Washington Mutual, at $307 billion the biggest bank failure in U.S. history, which was then sold at auction to JPMorgan Chase (JPM); and the difficulties other banks and investment banks have had.

But what has Congress, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson worried enough to propose a rescue plan in the hundreds of billions of dollars is the action in the credit markets. That’s often less easy to understand and less visible, but in large part, banks are afraid to take risks. So they aren’t lending to each other, and they aren’t lending to people or businesses -- at least not as much as they had.

So, Treasury has proposed a plan that would allow the government to buy some of the financial institutions’ most toxic holdings -- up to $700 billion at any one time -- in the hopes that if the worst things are off their books, banks will start lending again and help to unfreeze the economy.

Late Saturday, FOX News reported that a meeting of some of the key Congressional negotiators was discussing some proposed details of the plan, such as who would oversee it, which financial institutions would be allowed to participate, what limits if any would be placed on executive compensation for companies involved in the rescue and whether homeowners would receive any financial assistance.

In addition, a possible segment of the legislation would send 20% of any profits from the rescue plan to an affordable housing fund. Rep. Barney Frank (D, Mass.), in an interview with FOX Business, said he “wouldn’t count on any profits” -- but if there were any, a portion would “go to state and city housing trust funds.”

Some reports have said in recent days that this part of the proposal included money for ACORN, an affordable-housing group that has been under scrutiny for possible voter fraud, but Frank said, “there’s no ACORN funding. That’s a total myth.”

In his weekly radio address, President Bush tried to rally the American people around the legislation, saying, this was “an issue that transcends partisanship.” “If it were possible to let every irresponsible firm on Wall Street fail without affecting you and your family, I would do it. But that is not possible,” he said.

Bush and others are still trying to convince the public to support the plan, but Americans have been reluctant to back a proposal that many see as a bailout of the very people who profited the most from the housing bubble. In addition, with so few real details out about the plan’s components, rumors have been flying and there has been political maneuvering from all sides.

An Associated Press-Knowledge Networks poll found that only 30% of respondents supported Bush’s rescue package, with 45% opposed and 25% undecided. The survey was conducted on Thursday and had a margin of error of plus/minus 3.8 percentage points.

Many of the discussions in the past few days have reportedly been heated. Some Congressional Republicans have tried to formulate their own, more free-market-oriented proposal, and the Democrats haven’t appeared to be solidly behind the plan either.

It remains to be seen whether real progress can be accomplished before the Asian markets open Sunday night, or before the Jewish holiday of Rosh Hashanah begins Monday at sundown. Congress was supposed to have gone into recess on Friday so members could return to their districts for their final campaign pushes, with Election Day about five weeks away.

© 2009 FOXBusiness.com, Inc. All rights reserved.