In our ongoing effort to provide our clients and friends of the firm with updated information and insight on developments related to legislation to support the financial markets, the Foley & Lardner LLP Financial Crisis Response Team is pleased to provide the following summary of today's events in Washington.
Despite almost uniformly negative calls from constituents, most Members of Congress concede that the bailout legislation will move forward and expect that there will be a vote on the bill within the week. Representatives from the offices of Senate Banking Committee Chairman, Chris Dodd (D. CT), and House Financial Services Committee Chair, Barney Frank (D. MA), have been meeting today to hammer out differences between the Senate and House versions floated earlier this week. It is expected that Frank and Dodd will propose a joint alternative to the Administration's proposal on Thursday.
On the Republican side, there remains considerable opposition from the rank and file membership who are hearing almost unanimous opposition to the plan from constituents. The Republicans are not opposed to doing something, but they are not necessarily convinced the Administration's plan is the right prescription especially when they are hearing from economists that there are other ways to approach the issue. For example, a more targeted bill could be enacted into law with taxpayers getting something back if the program is successful or, alternatively, other institutions could provide the money with a government guaranty. It has been suggested that maybe this could be approached with "baby steps" with $50 billion to $100 billion being made available first. No matter what the outcome, this is perceived as a very risky vote for Republican Members.
Earlier in the day, Speaker of the House Nancy Pelosi and the Senate Democratic leadership were very angry with the White House and the Congressional Republican leadership for failing to pull their weight on the bailout legislation. The Speaker and Senate Majority Leader Reid were saying that if the White House does not deliver at least half the votes necessary to pass the package from the Republican ranks, then the Democrats will not deliver the other half necessary to enact the legislation. Moreover, Reid demanded that Senator John McCain return to Washington D.C. to vote FOR passage of the bailout package. This helps explain the President's decision to address the Nation at 9:00 P.M. (EDT) tonight and Senator McCain's announcement that he would suspend his campaign for President to work on the economic crisis. He called upon Senator Obama to join him in the effort and suggested that the Presidential debate scheduled for Friday, September 26 be rescheduled for October 2.
Today, members of the House Financial Services Committee grilled Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke about the President’s financial services bailout proposal and offered their own proposals and reactions to the President's plan. The Treasury Secretary’s and Chairman’s prepared statements echoed statements they gave before the Senate Banking Committee yesterday and before the Joint Economic Committee and House Republicans this morning.
Time was set aside prior to the Treasury Secretary’s and Chairman’s appearance for members to give testimony. Ten Democrats and four Republicans told of receiving almost uniformly negative calls from constituents about the $700 billion bailout plan since its unveiling over the weekend. Several members insisted that the President must address the nation and explain what the $700 billion plan would accomplish and why it would be less expensive than not acting, as Treasury Secretary Paulson has expressed repeatedly over the past several days.
Most of the committee members who spoke said that they realize they must act quickly, and yet they expressed frustration that they may not have the opportunity to deliberate about such an enormous government program. Members stressed their desire for vigorous oversight of the Treasury Secretary’s power under the plan, and they bristled at the “blank check” in the President’s original plan. Finally, the majority of members who spoke insisted on the inclusion of a compensation provision that would limit so-called “golden parachutes” for executives whose institutions are bailed out by the government. Secretary Paulson, who had opposed inclusion of a provision that limits executive compensation, has conceded this point and it is likely that it will be included in a final version.