Congress Struggles With Scope of Financial Rescue Plan

RAY SUAREZ:

The Washington debate began in earnest today over the bailout package proposed this weekend by the Bush administration. Treasury Secretary Henry Paulson, the administration's point man on the crisis, outlined the stakes in a series of Sunday morning talk show appearances.

HENRY PAULSON, U.S. Treasury Secretary:

This is not something that we wanted to do. This is something that is very necessary. The system was clogging up, and it was more difficult for companies to raise financing.

RAY SUAREZ:

The Treasury's draft proposal grants the secretary nearly unlimited power in spending up to $700 billion to buy mortgage-related assets from ailing financial institutions.

Both American companies and international firms with U.S. assets are eligible.

Periodic reports to Congress are due, but with little oversight of the program.

And the proposal raises the national debt ceiling to more than $11 trillion to allow for the bailout.

Paulson explained on ABC what led to the present problem and how his solution might work.

HENRY PAULSON:

We have a situation where American companies weren't able to borrow money. This could ultimately affect small banks, loans to businesses, loans to farmers, jobs, people's retirement.

What we are recommending is that the government buy illiquid assets in big size from the institutions — these are what are clogging up the system — so that they can play the role they need to play.

RAY SUAREZ:

There was concern among many on Capitol Hill that the proposal gave too much money and untrammeled power to the Treasury.

Brad Sherman, Democrat of California.

REP. BRAD SHERMAN (D), California: Why should the Department of the Treasury have total carte blanche? We should require that every major contract entered into under this bill and every purchase of toxic assets be approved in advance by the GAO. Otherwise, this is just a license for the Treasury to hand out money in return for trash, cash for trash, and they get to decide who to do it.

RAY SUAREZ:

Democrats also objected to the plan's Wall Street focus, lamenting a lack of protection for the people whose faulty mortgages are the root of the problem.

Various Democratic counterproposals included provisions that limit executive pay for firms asking for the bailout; greater congressional and independent agency oversight of the program; give the government an equity stake in the companies that are seeking a bailout; and help homeowners renegotiate mortgage terms.

However, the House minority leader, John Boehner of Ohio, said yesterday the Bush administration proposal should be passed quickly and without the add-ons.

REP. JOHN BOEHNER (R-OH), House Minority Leader: We don't need 535 members of Congress adding their best idea to this bill. We need to keep it clean, simple, move it through the House and Senate, and get it on the president's desk.

RAY SUAREZ:

But Mr. Boehner may get significant resistance from his own side of the aisle, which has raised many questions about the slate of recent bailouts, including the government takeovers of Fannie Mae and Freddie Mac, and the private insurance firm AIG.

Cliff Stearns is a Republican from Florida.

REP. CLIFF STEARNS (R), Florida: Through these bailouts, our federal government is effectively risking hard-earned taxpayers' dollars to protect private-sector companies that utilize reckless investment strategies with little regard to the consequences.

RAY SUAREZ:

Stearns and other members of the House Conservative Caucus echo many of the concerns across party lines now that Treasury has produced its sweeping plan.

GWEN IFILL:

Margaret Warner has more on the Capitol Hill reaction.