Deal in Limbo: Expected Agreement on Bailout Hits Snags

Key lawmakers emerged from a three-hour meeting on Thursday afternoon saying they had agreed on key details surrounding a planned bailout of the financial markets, only to have their hopes dashed in an evening meeting with President Bush that one Senator described as a “total disaster.” Nonetheless, both parties agreed to press on, and said they remain confident a deal can be done before this weekend is out.

Earlier in the day, key legislators said they had reached agreements on a proposal to break down the bailout funding into chunks, according to a Wall Street Journal report. Under the proposal, the Treasury would have access to $250 billion in funding for its “troubled asset resolution program” immediately, with an option on another $100 billion; Congress could withdraw the rest of the $700 billion total asked for by Treasury secretary Henry Paulson if results are unsatisfactory.

Other agreed-upon provisions entailed limits on executive compensation and the creation of a regulatory oversight board to manage the Treasury’s so-called “troubled asset resolution program.”

Despite reports by other trade media outlets earlier on Thursday suggesting that the agreed-upon bill contained language that would allow for so-called “cram-downs” of mortgage debt in bankruptcy proceedings, various wire reports and HW’s own sources on Capitol Hill suggested this was not the case. That particular provision — long contested by the White House and key lawmakers — is still being debated, one of our sources suggested.

“It’s still up for debate, but Democrats have consistently signaled they’re willing to let it go to make sure other provisions are won,” said the source, a lobbyist that asked not to be named. “Given strong GOP opposition, I don’t expect [cramdown legislation] will make it in.”

Apparently, much more than just a cramdown provision is up for debate: lawmakers emerged from an evening meeting with President Bush, both key Presidential candidates, John McCain (R-AZ) and Barack Obama (D-IL), as well as other key party members from the House and Senate, saying that the earlier agreed-upon deal had been shot down.

On an interview with CNN, Senate Banking Committee chairman Christopher Dodd (D-CT) said that a new mortgage proposal from Republicans was presented in the private meeting, blindsiding Congressional Democrats. The Connecticut Democrat said the meeting went “like a rescue plan for John McCain,” and said he would not “sign on to something I just saw this afternoon,” according to a MarketWatch report.

A separate MarketWatch bullet cited a “revolt” by House Republicans as the source of the discord.

The President had earlier pushed for a quick resolution to bailout discussions on national television Wednesday evening, saying that the “country could experience a long and painful recession” if immediate action wasn’t taken.

While Democrats, particuarly Senate Banking Committee chairman Chris Dodd (D-CT), were quick to suggest that a “fundamental agreement” had been reached, Republicans were skeptical of such an assessment nearly from the get-go, according to a report at CQ Politics.

“There’s not a deal. I didn’t hear it,” said Rep. Spencer Bachus (R-AL). “There was progress on the issues. Our preference is still a loan or some type of insurance.”

Noticeably absent from the negotiations earlier in the afternoon, as well, was Sen. Richard Shelby (R-AL), who has been vocally critical of the bailout. “I’ve never supported a direct bailout,” Shelby told the Wall Street Journal earlier this week.

He told reporters on Thursday ahead of the closed-door meeting at the White House that as far he was concerned, no deal had been reached.

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