WASHINGTON - The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.
The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.
Congressional aides and administration officials tried to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.
"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing specifics, he said, "This is a big package because it was a big problem."
But lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money. Democrats say it must include mortgage help so borrowers facing foreclosure can stay in their homes.
Sen. Chuck Schumer, D-N.Y., called the plan "a good foundation," but said it was missing "some kind of supervisory authority, and some kind of protection for homeowners and taxpayers."
Still, he said such measures shouldn't slow the package down. "If we wait too long, the floor could come out and everything could crash down," Schumer said.
The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.
"The American people are furious that we're in this situation, and so am I," the House's top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."
Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."
Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."
He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."
Democratic Sen. Max Baucus of Montana, the Senate Finance Committee chairman, said he would push to add measures "that keep the burden of this bailout off taxpayers, mostly by making reasonable requirements of the companies asking for this emergency help."
Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress. "This financial crisis requires leadership and action in order to restore a sound foundation to financial markets, get our economy on its feet, and eliminate this burden on hardworking middle-class Americans," McCain said in a statement.
Democratic rival Barack Obama used the party's weekly radio address to call for help for Main Street as well as Wall Street.
"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."
Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.
Besides mortgage help, Democrats are considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.
Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. "I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better," he said about legislation being drafted.
The draft does not specify which financial institutions would be eligible for the help, leaving open the question of whether hedge funds or pension funds could qualify. Congressional aides said that omission appeared to be by design, as the question of who could get help under the bailout is still up for negotiation.
The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.
The government could contract with private companies to manage the assets once it purchased them.
Treasury Secretary Henry Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept.
If enacted, the plan would give the treasury secretary broad power to buy, manage and sell the mortgage-related investments without any additional involvement by lawmakers. It would, however, require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.