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In the short run, congressional leaders have achieved their goal of producing an agreement Sunday on a federal bailout of banks and other financial institutions holding bad mortgage debts before the worlds stock markets reopened. federal bailout crisis of banks But in the long run, the scope and still-unknown effects of the greatest government intervention in the financial markets since the Great Depression - and the remaining underlying instability of the nations economy -- will impose a new political challenge for the next president and Congress elected in November. The situation already has reshaped the election campaign debate. Congressional leaders face another immediate challenge this week - with the House expected to vote on the plan as soon as Monday, and the Senate as soon as Wednesday - in corralling enough votes to both pass it and present the controversial two-stage bailout as a bipartisan response to a national crisis. While resistant House Republican leaders have agreed to it, many rank and file members still are balking at the unprecedented bailout of the nations financial institutions, piling as much as $700 billion of new federal debt on the nations taxpayers. Congressional leaders are attempting to frame the measure as their own best compromise on a plan that the Bush administration proposed which they are now calling unacceptable. This means, in part, dividing the bailout into two phases, starting with $350 billion but requiring congressional approval for a second pay-out. And it includes a demand that, if the government does not recoup all the money that it invests in reselling mortgage debt that it purchases, banks after five years must pay the balance. http://bailoutcrisis.com/bailouts-through-history/salomon-brothers/ "This is the administrations problem, House Speaker Nancy Pelosi (D-Calif.) said Sunday, "they sent us their bill, we did our best to improve it, and now well see how much support we can get... We will have to have bipartisanship to pass it. President Bush, who proposed the Treasury Department rescue and has pushed for it with national television and radio addresses, calls it essential to averting "financial panic in frozen lending and a "long and painful recession. Congressional leaders agree that it is essential in averting a freeze in credit for everything from home loans and car loans to student loans and credit cards. http://bailoutcrisis.com/bailouts-through-history/apple/ "Getting this done soon, promptly, is absolutely critical to the confidence of the markets, Sen. Judd Gregg (R-N.H.), one of the lead negotiators, said Sunday, predicting the votes to approve it this week. "The option of not passing it is not acceptable. Resistant Republican leaders are calling on their colleagues to support the plan - if their "conscience will allow them. "The American people are angry, angry about the situation they find themselves in, House Minority Leader John Boehner (R-Ohio) said Sunday night after hours of closed-door meetings with fellow Republicans balking at the plan. "My colleagues are angry about the situation they find themselves in. Nobody wants to have to support this bill. In selling the plan to his party, Rep. Ray Blunt (R-Mo.) is calling it "a work-out of the problem, rather than a bailout. How many Republican votes can they deliver? "We dont know, Boehner said, "Weve made it pretty clear to our members that we are supporting this bill.... Im encouraging every member of our conference whose conscience will allow them to support this bill. The dueling candidates for president, two senators who had agreed on conditions that must be part of the federal bailout, both said Sunday that they are inclined to support the agreement. "Id like to see the details, but hopefully yes, Sen. John McCain (R-Ariz.) said in an appearance on ABCs This Week. http://bailoutcrisis.com/bailouts-through-history/goldman-sachs-hedge-fund/ "The outlines that I have read of... this is something that all of us will swallow hard and go forward with, McCain said. "The option of doing nothing is simply not an acceptable option. ""Im going to be reviewing the language, Sen. Barack Obama (D-Ill.) said on CBS Face the Nation. "Ultimately, I feel that we have to get something done, so if I feel those are meaningful provisions... then my inclination is to support it. Many Republicans, however, are lining up against it. Rep. Mike Pence of Indiana, who spoke out early against the plan first proposed by Paulson, circulated a letter to colleagues on Sunday: "We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price? Leaders say they have crafted the measure to ensure that banks will pay the price if the Treasury cannot recover all of the potentially $700 billion that it puts into the bailout. "This bill, while not perfect, will help stabilize the economy, said Senate Majority Leader Harry Reid (D-Nev.), "and I think its going to help the taxpayers. Down the road, all agree, the government must pursue more effective and streamlined regulation of the financial markets - something that Paulson was proposing long before the depth of the nations financial crisis was exposed with failing mortgage consortiums, investment banks, an insurance company and now more banks falling victim to a credit freeze. "The real effect of this is going to restore some confidence, and get some credit out there, and get the economic system moving again, which is basically in gridlock today, McCain said. If elected president, Obama said Sunday, he will "move quickly to upgrade the governments financial regulation for a 21st Century economy. Yet, despite the impact of the bailout, a stumbling economy could pose a monumental problem for the next president. Obama has conceded that some of his new taxes and initiatives, such as health care for the uninsured, may have to be "phased in if the economy does not turn around quickly. And McCain insists that more taxes must be cut to spur the economy. The bailout of Wall Street is intended to benefit everyone on Main Street, the president and others maintain. Yet on Main Street, hundreds of thousands of jobs already have been lost this year. "They said they wanted to let the market run wild, Obama said Sunday, campaigning in Detroit, "and now we see whats happened... For many here in Detroit, it isnt really news at all. Six-hundred thousand people have lost their jobs since January. The situation already has cast the economy as a pivotal factor in the presidential election contest. ""I know we can steer ourselves out of this crisis, because thats who we are, thats what we always do, Obama said in Detroit. "Weve had slavery in this country, weve had Great Depressions in this country. Weve had World Wars in this country, and in each... instance we have come together and we have met those challenges.
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