History > 2008 > USA > Politics > House of Representatives (I)

Trying to Avoid Economic Calamity,

Lawmakers Grope for Resolution

September 30, 2008
The New York Times
By CARL HULSE
and DAVID M. HERSZENHORN

WASHINGTON — Defying President Bush and the leaders of both parties, rank-and-file lawmakers in the House on Monday rejected a $700 billion economic rescue plan in a revolt that rocked the Capitol, sent markets plunging and left top lawmakers groping for a resolution.

The stunning defeat of the proposal on a 228-205 vote after marathon talks by senior Congressional and Bush administration officials lowered a fog of uncertainty over economies around the globe. Its authors had described the measure as essential to preventing widespread economic calamity.

The markets began to plummet even before the 15-minute voting period expired on the House floor. For 25 more minutes, uncertainty gripped the nation as television showed party leaders trying, and failing, to muster more support. Finally, Representative Ellen Tauscher, Democrat of California, pounded the gavel and it was done.

In the end, only 65 Republicans — just one-third of those voting — backed the plan despite personal pleas from President Bush and encouragement from their presidential nominee, Senator John McCain. By contrast, 140 Democrats, or 60 percent, voted in favor, many after voicing grave misgivings. Their nominee, Senator Barack Obama, also backed the bill.

By the end of day, the Dow had fallen almost 778 points, or nearly 7 percent, to 10,365. Credit markets also remained distressed, with bank lending rates rising and investors fleeing to the safety of Treasury bills.

Among opponents of the rescue plan, some Republicans cited ideological objections to government intervention, and liberal Democrats said they were of no mind to race to aid Wall Street tycoons. Other critics complained about haste and secrecy in assembling the plan.

But lawmakers on both sides pointed to an outpouring of opposition from deeply hostile constituents just five weeks before every seat in the House was up for election as a fundamental reason that the measure was defeated. House members in potentially tough races and those seeking Senate seats fled from the plan in droves.

“People’s re-elections played into this to a much greater degree than I would have imagined,” said Representative Deborah Pryce of Ohio, a former member of the Republican leadership who is retiring this year and voted for the plan. Congressional leaders in both parties said they did not know how they would proceed but were examining options, including having the Senate, where there was more support for the bailout, advance a bill after the Jewish New Year on Tuesday. Congressional leaders said any doubt about the need for action should have been removed by the market fall.

“We’re not leaving town till we get it fixed,” said Senator Mitch McConnell of Kentucky, the Republican leader.

At the White House, Mr. Bush met with his economic advisers as well as the Federal Reserve chairman, Ben S. Bernanke, to discuss next steps. “I was disappointed in the vote,” Mr. Bush said, appearing in the Oval Office with President Viktor A. Yushchenko of Ukraine. “Our strategy is to continue to address this economic situation head on.”

The Treasury secretary, Henry M. Paulson Jr., who was the main architect of the financial rescue plan, said he would continue to work with Congressional leaders “to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people.” He added, “This is much too important to simply let fail.”

Mr. McCain and Mr. Obama renewed their calls for swift action, though each campaign sought to partly blame the other for the defeat.

At the Capitol, Democrats accused Republicans of failing to deliver enough number of votes. “Sixty-seven percent of the Republican Conference decided to put political ideology ahead of the best interest of our great nation,” the Democratic whip, Representative James E. Clyburn of South Carolina, said after the vote.

Representative Roy Blunt of Missouri, the Republican whip, said that before the vote he had tallied 75 votes in his conference in favor of the plan. By the time the votes were cast, the Republicans could deliver only 65 of them.

Other top Republicans pointed at what they saw as a partisan speech by Speaker Nancy Pelosi in advance of the vote as a factor — a charge Democrats derided.

Republicans said they had alerted Democrats they might not have the numbers required. But they never recommended the legislation be put off and in the end they were unable to win any last-second converts to change the votes that would have been necessary to turn defeat into victory.

Representative John A. Boehner of Ohio, the House Republican leader, said he tried repeatedly and unsuccessfully to sway a handful of holdouts, but eventually gave up.

“You can’t break their arms, you can’t put your whole relationship on the line with them and ask them to do something they do not want to do and have that member regret that vote for the rest of their life,” said Mr. Boehner, who said he could not remember a time when the muscle of both parties and the White House failed to produce a victory.

The outcome after a slightly more than 40-minute vote on the House floor left lawmakers almost speechless. Even the strongest opponents of the measure did not expect to prevail, and the leadership of both parties, while increasingly nervous, figured they would squeak out a victory despite a parade of Republicans and Democrats to microphones to assail the measure. At the White House, the deputy press secretary, Tony Fratto, said just before the vote: “We’re confident that it will pass.”

Under the proposal, the Treasury Department could tap up to $700 billion in taxpayer money in installments to buy troubled debt from financial firms, in the hopes of freeing up credit to fuel normal economic activity.

In the final stages of negotiations, new provisions intended to recoup taxpayer losses were added. They helped the measure win support from Mr. Boehner and some other House Republican leaders, who had strongly opposed an earlier version of the bill. But they did not put the package over the top.

In impassioned speeches on the House floor, Democrats and Republicans alike vented their frustration over the nation’s perilous economic condition and the uncomfortable position they were in, facing pressure to approve an unpopular bailout package during an election year, with no guarantee that it would work.

“This is a huge cow patty with a piece of marshmallow stuck in the middle of it and I am not going to eat that cow patty,” said Representative Paul Broun, Republican of Georgia.

“Nobody wants to do this,” said Representative Edward J. Markey, Democrat of Massachusetts, who nonetheless voted for it. “Nobody wants to clean up the mess created by Wall Street recklessness.”

In the speech that Republicans said infuriated them, Ms. Pelosi accused Mr. Bush of squandering the budget surpluses of the Clinton years. “They claim to be free-market advocates, when it’s really an anything-goes mentality,” she said. “No supervision. No discipline. And if you fail, you will have a golden parachute and the taxpayer will bail you out.”

Democrats later said that if her speech truly cost votes, then Republicans, in the words of Representative Barney Frank, Democrat of Massachusetts, were guilty of punishing the country because Ms. Pelosi had hurt their feelings.

As the voting time expired on the floor, party leaders realized they were coming up far short. At 1:49 p.m., it was 205 for and 228 against. At 1:54 p.m., they inched closer: 207 to 226, as some representatives changed their votes. What followed was a remarkable stalemate on the House floor, with top lieutenants in both parties clutching lists of votes, as they clustered in the well and made unusual forays into what is normally enemy territory across the aisle.

“I was asking where the hell their votes were,” said Representative Rahm Emanuel of Illinois, the No. 4 Democrat.

Mr. Blunt said he told Democrats he thought he could flip five votes, if Democrats could do the same. Democrats had warned that the Republicans that they would need to produce 80 to 100 votes to adopt an unpopular plan championed by the Republican White House. Ultimately, the Democrats decided the votes were not there and they allowed the gavel to come down. Opponents of the measure said they expected the administration and Congressional leaders to try again on a rescue proposal and were not worried about being held responsible for the stock decline or other economic uncertainty.

“I think we will be back in a couple of days with a proposal more palatable to more members,” said Representative John Yarmuth, a Kentucky Democrat who voted against the plan. “You don’t make the biggest financial decision in the history of this country in a few days’ time without hearings.”

But Representative Tom Davis, a Virginia Republican who is retiring from Congress and who backed the proposal, said those who opposed to the measure might be hearing a different message from their voters if economic conditions worsen. “The members who voted no will have some culpability,” he said.

The House leadership said Monday night that the House would reconvene at noon Thursday, though it was not known if another economic plan would be on the table.

“Stay tuned,” said Ms. Pelosi, who seemed physically drained. But she added: “What happened today cannot stand. We must move forward, and I hope that the markets will take that message.”

Representative Greg Walden, an Oregon Republican who supported the bailout, said lawmakers may quickly discover “whether this is as dire a situation as we were told.”

“This is playing with fire,” Mr. Walden said. “It’s very, very dangerous.”
 

Robert Pear, Steven Lee Myers and Sheryl Gay Stolberg contributed reporting.

    Trying to Avoid Economic Calamity, Lawmakers Grope for Resolution, NYT, 30.9.2008, http://www.nytimes.com/2008/09/30/business/30cong.html

House Rejects Bailout Package, 228-205,

But New Vote Is Planned; Stocks Plunge

September 30, 2008
The New York Times
By CARL HULSE and DAVID M. HERSZENHORN

WASHINGTON — In a moment of historic drama in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry.

The vote against the measure was 228 to 205. Supporters vowed to try to bring the rescue package up for consideration against as soon as possible.

Stock markets plunged sharply at midday as it appeared that the measure was go down.

House leaders pushing for the package kept the voting period open for some 40 minutes past the allotted time, trying to convert “no” votes by pointing to damage being done to the markets, but to no avail.

Supporters of the bill had argued that it was necessary to avoid a collapse of the economic system, a calamity that would drag down not just Wall Street investment houses but possibly the savings and portfolios of millions of Americans. Opponents said the bill was cobbled together in too much haste and might amount to throwing good money from taxpayers after bad investments from Wall Street gamblers.

Should the measure somehow clear the House on a second try, the Senate is expected to vote later in the week. The Jewish holidays and potential procedural obstacles made a vote before Wednesday virtually impossible, but Senate vote-counters predicted that there was enough support in the chamber for the measure to pass. President Bush has urged passage and spent much of the morning telephoning wavering Republicans to plead for their support.

Many House members who voted for the bill held their noses, figuratively speaking, as they did so. Representative John A. Boehner of Ohio, the Republican minority leader, said there was too much at stake not to support it. He urged members to reflect on the damage that a defeat of the measure could mean “to your friends, your neighbors, your constituents” as they might watch their retirement savings “shrivel up to zero.”

And Representative Steny Hoyer of Maryland, who as Democratic majority leader often clashes with Mr. Boehner, said that on this “day of consequence for America” he and Mr. Boehner “speak with one voice” in pleading for passage.

When it comes to America’s economy, Mr. Hoyer said, “none of us is an island.”

The House debate was heated and, occasionally, emotional up to the last minute, as illustrated by the remarks of two California lawmakers.

Representative Darrell Issa, a Republican, said he was “resolute” in his opposition to the measure because it would betray party principles and amount to “a coffin on top of Ronald Reagan’s coffin.”

But Representative Maxine Waters, a Democrat, said the measure was vital to help financial institutions survive and keep people in their homes. “There’s plenty of blame to go around,” she said, and attaching blame should come later.

The House vote came after a weekend of tense negotiations produced a rescue plan that Congressional leaders said was greatly strengthened by new taxpayer safeguards. “If we defeat this bill today, it will be a very bad day for the financial sector of the economy,” Representative Barney Frank, Democrat of Massachusetts and the chairman of the Financial Services Committee, said as the debate began and the stock market opened sharply lower. The Standard & Poor’s 500 index was down almost 3.4 percent at midmorning.

Earlier Monday, President Bush urged Congress to act quickly. Calling the rescue bill “bold,” Mr. Bush praised lawmakers “from both sides of the aisle” for reaching agreement, and said it would “help keep the crisis in our financial system from spreading throughout our economy.”

He said the vote would be difficult, but he urged lawmakers to pass the bill promptly. “A vote for this bill is a vote to prevent economic damage to you and your community,” he said.

“We will make clear that the United States is serious about restoring stability and confidence in our system,” he said, speaking at a lectern set up on a path on the White House grounds.

He addressed concerns about the high cost of the legislation to taxpayers, but he said he expected that “much if not all of the tax dollars will be paid back.”

Despite Mr. Bush’s urgings, investors around the world continued to demonstrate doubts that the bill would fully address the financial crisis. European and Asian stock markets declined sharply on Monday, especially in countries where major banks have had significant problems with mortgage investments, like Britain and Ireland. In the credit markets, investors once again bid up prices of Treasury securities and shunned more risky debt.

The 110-page rescue bill, intended to ease a growing credit crisis, was shaped by a frenzied week of political twists and turns that culminated in an agreement between the Bush administration and Congressional leaders early Sunday morning.

The measure faced stiff resistance from Republican and Democratic lawmakers who portrayed it as a rush to economic judgment and an undeserved aid package for high-flying financiers who chased big profits through reckless investments.

Early in the House debate, Jeb Hensarling, Republican of Texas, said he intended to vote against the package, which he said would put the nation on “the slippery slope to socialism.” He said that he was afraid that it ultimately would not work, leaving the taxpayers responsible for “the mother of all debt.”

Another Texas Republican, John Culberson, spoke scathingly about the unbridled power he said the bill would hand over to the Treasury secretary, Henry M. Paulson Jr., whom he called “King Henry.”

A third Texan, Lloyd Doggett, a Democrat, said the negotiators had “never seriously considered any alternative” to the administration’s plan, and had only barely modified what they were given. He criticized the plan for handing over sweeping new powers to an administration that he said was to blame for allowing the crisis to develop in the first place.

With the financial package looming as a final piece of business before lawmakers leave to campaign for the November elections, leaders of both parties in the House and Senate intensified their efforts to sell reluctant members of Congress on the legislation.

All sides had to surrender something. The administration had to accept limits on executive pay and tougher oversight; Democrats had to sacrifice a push to allow bankruptcy judges to rewrite mortgages; and Republicans fell short in their effort to require that the federal government insure, rather than buy, the bad debt.

Even so, lawmakers on all sides said the bill had been significantly improved from the Bush administration’s original proposal.

The final version of the bill included a deal-sealing plan for eventually recouping losses; if the Treasury program to purchase and resell troubled mortgage-backed securities has lost money after five years, the president must submit a plan to Congress to recover those losses from the financial industry. Presumably that plan would involve new fees or taxes, perhaps on securities transactions.

“This is a major, major change,” Speaker Nancy Pelosi said on Sunday evening as she declared that negotiations were over and that a House vote was planned for Monday, with Senate action to follow.

The deal would also restrict gold-plated farewells for executives of companies that sell devalued assets to the Treasury Department.

House Republicans had threatened to scuttle the deal, and proposed a vastly different approach that would have focused on insuring troubled debt rather than buying it. In the end, the insurance proposal was included on top of the purchasing power, but there is no requirement that the Treasury secretary use it, leaving them short of that goal.

It is virtually impossible to know the ultimate cost of the rescue plan to taxpayers, but Congressional leaders stressed that it would likely be far less than $700 billion. Because the Treasury will buy assets with the potential to resell them at a higher price, the government might even turn a profit.

That provision, pushed by House Democrats, was the last to be agreed to in a high-level series of talks that had top lawmakers and White House economic advisers hustling between offices just off the Capitol Rotunda until midnight on Saturday, scrambling to strike an agreement before Asian markets opened Sunday night.

The bill calls for disbursing the money in parts, starting with $250 billion followed by $100 billion at the discretion of the president. The Treasury can request the remaining $350 billion at any time, and Congress must act to deny it if it disapproves.

Ms. Pelosi, Mr. Paulson and others taking part in the talks announced that they had clinched a tentative deal at 12:30 a.m. Sunday, exhausted and a little giddy after more than seven hours of sparring. There were several tense moments, none more so than when Mr. Paulson, a critical player, suddenly seemed short of breath and possibly ill. He was tired, but fine.

Trying to bring around colleagues who remained uncertain of the plan, its architects sounded the alarm about the potential consequences of doing nothing. Senator Judd Gregg of New Hampshire, the senior Republican on the Budget Committee and the lead Senate negotiator, raised the prospect of an economic catastrophe.

“If we don’t pass it, we shouldn’t be a Congress,” Mr. Gregg said.

Both major presidential candidates, Senator John McCain of Arizona, the Republican nominee, and Senator Barack Obama of Illinois, the Democratic candidate, gave guarded endorsements of the bailout plan. Both Mr. McCain and Mr. Obama had dipped into the negotiations during a contentious White House meeting on Thursday.

On Sunday evening, both parties convened closed-door sessions in the House to review the plan, and conservative House Republicans remained a potential impediment.

But the party leadership was circulating information aimed at refuting some of the main criticisms of the bailout, indicating they were poised to support it. “I am encouraging every member of our conference whose conscience will allow them to support this bill,” said Representative John A. Boehner of Ohio, the Republican leader.

A series of business-oriented trade associations with influence with Republicans also began weighing in on behalf of the plan.

The United States Chamber of Commerce issued a statement on Sunday night that said it “believes the legislation contains the necessary elements to successfully remove the uncertainty and stem the turmoil that has plagued financial markets in recent weeks.”

Members of the conservative rank and file remained unconvinced.

“While it creates a gimmicky $700 billion installment plan, attempts to improve transparency, and has new provisions cloaked as taxpayer protections, its net effect is still a huge bailout of the financial sector that will snuff out the free market system,” said Representative Connie Mack, Republican of Florida.

Some Democrats bristled that they were now being called on to do the financial bidding of an administration they had viewed as previously uncooperative in dealing with executives who had performed irresponsibly or worse.

“Financial crimes have been committed,” said Representative Marcy Kaptur, Democrat of Ohio. “Now Congress is being asked to bail out the culprits.”

Throughout Sunday, small groups of lawmakers could be found around the Capitol exchanging their views on the plan. Some said they were willing to take a political risk and back it.

One, Representative Jim Marshall, a Georgia Democrat facing a re-election contest, told colleagues in a private meeting that he would vote for the measure to bolster the economy. “I am willing to give up my seat over this,” Mr. Marshall said, according to another person who was there.

The architects of the plan said they realized they were calling on Congress to cast a tough vote since lawmakers might not get credit for averting a financial crisis since some constituents will not believe one was looming.

“Avoiding a catastrophe won’t be recognized,” said Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee. “This economy is not going to have a blossoming on Wednesday.”

But he and others said the support from the two presidential contenders should provide some comfort to nervous lawmakers.

One of the more contentious issues was how to limit the pay of executives whose firms seek government aid, a top priority for Democrats and even some Republican lawmakers. But it was a concern for Mr. Paulson, who worried about discouraging firms from participating in the rescue plan, which seeks to convince companies to sell potentially valuable assets to the government at relatively bargain prices.

In the end, they settled on different rules for different companies depending on how they participate in the bailout. Firms that sell distressed debt directly to the government will be subject to tougher pay limits, including a mechanism to recover any bonuses or other pay based on corporate earnings that turn out to be inaccurate or fraudulent, and a ban on so-called “golden parachute” severance packages as long as the government has a stake in the firm.

Companies that participate in auctions, or other market-making mechanisms, and sell more than $300 million in troubled financial instruments to the government, will be barred from making any new employment contract with a senior executive that provides a golden parachute in the event of “involuntary termination, bankruptcy filing, insolvency or receivership.”

While some critics said the limits did not go far enough, lawmakers described the provision as a historic first step by Congress to limit exorbitant pay of corporate titans. “I think we wrote it as tight as we can get it in here,” Mr. Dodd said.

Reporting was contributed by Keith Bradsher from Hong Kong, Robert Pear from Washington and Graham Bowley from New York.

    House Rejects Bailout Package, 228-205, But New Vote Is Planned; Stocks Plunge, NYT, 30.9.2008, http://www.nytimes.com/2008/09/30/business/30bailout.html?hp

Transcript of Speaker Pelosi’s Speech

September 30, 2008
The New York Times

Text of a speech given by Speaker Nancy Pelosi before the House vote on the bailout plan on Monday.

Madam speaker, when was the last time anyone ever asked you for $700 billion? It’s a staggering figure. And many questions have arisen from that request. And we have been hearing, I think, a very informed debate on all sides — of — of this issue here today. I’m proud of the debate.

$700 billion. A staggering number. But only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness. When President Bush took office, he inherited President Clinton’s surpluses — four years in a row, budget surpluses, on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned that around.

And now eight years later, the foundation of that fiscal irresponsibility, combined with an anything goes economic policy, has taken us to where we are today. They claim to be free market advocates, when it’s really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out.

Those days are over. The party is over in that respect. Democrats believe in a free market. We know that it can create jobs, it can create wealth, it can create many good things in our economy. But in this case, in its unbridled form, as encouraged, supported, by the Republicans — some in the Republican Party, not all — it has created not jobs, not capital, it has created chaos.

And it is that chaos that the secretary of the Treasury and the chairman of the Fed came to see us just about a week and a half ago — seems like an eternity, doesn’t it, so much has happened, the news was so bad. They described a very, very dismal situation. A dismal situation describing the state of our economy, the fragility of our financial institutions and the instability of our markets, our equity markets, our credit markets, our bond market.

And here we were listening to people who knew of what they spoke. Secretary of the Treasury brings long credentials and knowledge of the markets. More fearful, though, to me, more scary, was the statement — were the statements of Chairman Bernanke [Ben S. Bernanke, chairman of the Federal Reserve], because Chairman Bernanke is probably one of the foremost authorities in America on the subject of the Great Depression. I don’t know what was so great about the Depression, but that’s the name they give it. And we heard the secretary and the chairman tell us that this was a once in a hundred year phenomenon, this fiscal crisis was so drastic. Certainly once in 50 years, probably once in a hundred years.

And how did it sneak up on us? So silently, almost on little cat feet. That they would come in on that day — and they didn’t actually ask for the money, that much money that night. It took two days until we saw the legislation that they were proposing to help calm the markets. And it was on that day that we learned of a $700 billion request.

But it wasn’t just the money that was alarming. It was the nature of the legislation. It gave the secretary of the Treasury czar-like powers, unlimited powers, latitude to do all kinds of things and specifically prohibited judicial review or review of any other federal administrative agency to review their actions.

Another aspect of it that was alarming is it gave the secretary the power to use any money that came back from these infusions of cash to be used at the discretion of the secretary. Not to reduce the deficit, not to go into the general funds so that we could afford other priorities. To be used at the discretion of the secretary. It was shocking. Working together in a bipartisan way, we were able to make major improvements on that proposal, even though its fundamental basis was almost arrogant and insulting.

The American people responded almost immediately. Overwhelmingly, they said they know that something needs to be done. Say 78 percent of the American people said Congress must act. Fifty-eight-some percent said, but not to accept the Bush proposal. And so here we are today, a week later and a couple of days later, coming to the floor with a product — not a bill that I would have written, one that has major disappointments with me, beginning with the fact that it does not have bankruptcy in this bill — and we will continue to persist and work to achieve that.

It’s interesting, though, to me that when they describe this, the magnitude of the challenge and the precipice that we were on and how we had to act quickly and we had to act boldly and we had to act now, that it never occurred to them that the consequences of this market were being felt well in advance by the American people. And unemployment is up, and therefore we need unemployment insurance. That jobs are lacking, and therefore we need a stimulus package. So how can on the one hand could this be so urgent at the moment, and yet so unnecessary for us to address the effects of this poor economy in the households of America across our country?

We’ll come back to that in a moment. Working together, we put together some standards — and I am really proud of what Barney Frank did in this regard. The first night, that night, that Thursday night, when we got the very, very dismal news, he immediately said, if we’re going to do this — and Spencer Bachus was a part of this as well — in terms of if we’re going to do this, we must have equity for the American people. We’re putting up $700 billion, we want the American people to get some of the upside. So equity, fairness for the American people.

Secondly, if they were describing the root of the problem as the mortgage-backed securities, Barney insisted that we would have forbearance on foreclosure. If we’re now going to own that paper, that we would then have forbearance to help responsible homeowners stay in their home.

In addition to that, we have to have strong, strong oversight. We didn’t even have to see the $700 billion or the full extent of their bill to know that we needed equity and upside for the taxpayer, forbearance for the homeowner, oversight of the government on what they were doing, and something that the American people understand full well, an end to the golden parachutes and the — a — review and reform of the compensation for C.E.O.’s.

Let’s get this straight. We have a situation where on Wall Street people are flying high, they are making unconscionable amounts of money. They make a lot of money, they privatize the gain, the minute things go tough, they nationalize the risk. They get a golden parachute as they drive their firm into the ground, and the American people have to pick up the tab. Something is very, very wrong with this picture.

So just on first blush, that Thursday night, we made it clear, meeting much resistance on the part of the administration, that those four things, equity, forbearance, oversight, and reform of compensation. Overriding all of this is a protection of the taxpayer. We need to stabilize the markets. In doing so, we need to protect the taxpayers.

And that’s why I’m so glad that this bill contains a suggestion made by Mr. Tanner [Representative John Tanner, Democrat of Tennessee] that if at the end of the day, say in five years, when we can take a review of the success or whatever of this initiative, that if there is a shortfall and we don’t get our whole $700 billion back that we have invested, that there will be an initiative to have the financial institutions that benefited from this program to make up that shortfall.

But not one penny of this should be carried by the American people. People asked, and Mr. Spratt [Representative John M. Spratt Jr., Democrat of South Carolina] spoke with great knowledge and eloquence on the budget and aspects of the budget. $700 billion, what is the impact, what is the opportunity cost for our country of the investments that we would want to make?

O.K., now we have it in place where the taxpayer is going to be made whole and that was very important for us. But why on the drop of a hat can they ask us for $700 billion, and we couldn’t get any support from the administration on a stimulus package that would also help grow the economy?

People tell me all over the world that the biggest emerging market, economic market in the world, is rebuilding the infrastructure of America. Roads, bridges, waterways, water systems in addition to waterways. The grid, broadband, schools, housing, certain schools. We are trillions of dollars in deficit there.

We know what we need to do to do it in a fiscally sound way, in a fiscally sound way that creates good-paying jobs in America immediately. Brings money into the treasury by doing so, and again does all of this in an all-American way. Good-paying jobs here in America.

We can’t get the time of day for 25, $35 billion for that, which we know guarantees jobs, et cetera, but $700 billion. So make no mistake, when this Congress adjourns today to observe Rosh Hashanah and have members go home for a bit, we are doing so at the call of the chair. Because this subject is not over, this discussion about how we save our economy.

And we must insulate Main Street from Wall Street. And as Congresswoman Waters [Representative Maxine Waters, Democrat of California] said, Martin Luther King Drive, in my district Martin Luther King Drive, and Cedar Chavez Road and all of the manifestations of community and small businesses in our community. We must insulate them from that. And so we have difficult choices, and so many of the things that were said on both sides of this issue in terms of its criticisms of the bill we have and the bill that we had at first, and the very size of this, I share. You want to go home, so I’m not going to list all of my concerns that I have with it.

But it just comes down to one simple thing. They have described a precipice. We are on the brink of doing something that might pull us back from that precipice. I think we have a responsibility. We have worked in a bipartisan way. I want to acknowledge Mr. Blunt and Mr. Boehner, the work that we have done together, trying to find as much common ground as possible on this.

But we insisted the taxpayer be covered. We all insisted that we have a party-is-over message to Wall Street. And we insisted that, that taxpayers at risk must recover — that any risk must be recovered. I told you that already. So, my colleagues, let’s recognize that this Congressional — this legislation is not the end of the line.

Mr. Waxman [Representative Henry A. Waxman, Democrat of California] will be having vigorous oversight this week, hearings this week on regulatory reform and other aspects of it. I hope you will pursue fraud and mismanagement and the rest. Mr. Frank and his committee will continue to pursue other avenues that we can stabilize the markets and protect the taxpayer. For too long, this government, in eight years, has followed a right-wing ideology of anything goes, no supervision, no discipline, no regulation.

Again, all of us are believers in free markets, but we have to do it right. Now, let me again acknowledge the extraordinary leadership of Mr. Frank. He has been an exceptional leader in the Congress, but never has his knowledge and his experience and his judgment been more needed than now. And I thank you, Mr. Frank, for your exceptional leadership, Mr. Chairman.

I also — so many people worked on this, but I also want to acknowledge the distinguished chair of our caucus, Mr. Emanuel. His knowledge of the markets, the respect he commands on those subjects, and his boundless energy on the subjects served us well in these negotiations. But this, this is a bipartisan initiative that we are bringing to the floor. We have to have a bipartisan vote on this. That is the only message that will send a message of confidence to the markets.

So I hope that — I know that we will be able to live up to our side of the bargain. I hope the Republicans will, too.

But my colleagues, as you go home and see your families and observe the holiday and the rest, don’t get settled in too far, because as long as the American — this challenge is there for the American people, the threat of losing their jobs, the credit, their credit, their jobs, their savings, their retirement, the opportunity for them to send their children to college.

As long as in the households of America, this crisis is being felt very immediately and being addressed at a different level, we must come back, and we will come back as soon and as often as it is necessary to make the change that is necessary. And before long we will have a new Congress, a new president of the United States, and we will be able to take our country in a new direction.

    Transcript of Speaker Pelosi’s Speech, NYT, 30.9.2008, http://www.nytimes.com/2008/09/30/washington/30pelositranscript.html

Bailout Plan in Hand, House Braces for Tough Vote

September 30, 2008
The New York Times
By CARL HULSE and DAVID M. HERSZENHORN

WASHINGTON — President Bush made a televised statement at the White House early on Monday urging Congress to act quickly, as the House of Representatives braced for a difficult vote on a $700 billion rescue of the financial industry.

The vote, expected later on Monday, comes after a weekend of tense negotiations produced a rescue plan that Congressional leaders said was greatly strengthened by new taxpayer safeguards.

Calling it a “bold” bill, Mr. Bush praised lawmakers “from both sides of the aisle” for reaching agreement, and said it would “help keep the crisis in our financial system from spreading throughout our economy.”

He said the vote would be difficult, but he urged lawmakers to pass the bill promptly. “A vote for this bill is a vote to prevent economic damage to you and your community,” he said.

“We will make clear that the United States is serious about restoring stability and confidence in our system,” he said, speaking at a lectern set up on a path on the White House grounds.

He addressed concerns about the high cost of the legislation to taxpayers, but he said he expected that “much if not all of the tax dollars will be paid back.”

Despite Mr. Bush’s urgings, investors around the world continued to demonstrate doubts that the bill would pass, or if it does, whether it would fully address the financial crisis. European and Asian stock markets declined on Monday, and there were early signs that American markets would trade lower as well.

The 110-page rescue bill, intended to ease a growing credit crisis, was shaped by a frenzied week of political twists and turns that culminated in an agreement between the Bush administration and Congressional leaders early Sunday morning.

The measure still faced stiff resistance from Republican and Democratic lawmakers who portrayed it as a rush to economic judgment and an undeserved aid package for high-flying financiers who chased big profits through reckless investments.

With the financial package looming as a final piece of business before lawmakers leave to campaign for the November elections, leaders of both parties in the House and Senate intensified their efforts to sell reluctant members of Congress on the legislation.

All sides had to surrender something. The administration had to accept limits on executive pay and tougher oversight; Democrats had to sacrifice a push to allow bankruptcy judges to rewrite mortgages; and Republicans fell short in their effort to require that the federal government insure, rather than buy, the bad debt.

Even so, lawmakers on all sides said the bill had been significantly improved from the Bush administration’s original proposal.

The final version of the bill included a deal-sealing plan for eventually recouping losses; if the Treasury program to purchase and resell troubled mortgage-backed securities has lost money after five years, the president must submit a plan to Congress to recover those losses from the financial industry. Presumably that plan would involve new fees or taxes, perhaps on securities transactions.

“This is a major, major change,” Speaker Nancy Pelosi said on Sunday evening as she declared that negotiations were over and that a House vote was planned for Monday, with Senate action to follow.

The deal would also restrict gold-plated farewells for executives of companies that sell devalued assets to the Treasury Department.

On Sunday, President Bush called the measure “a very good bill” and praised Congressional leaders. “This plan sends a strong signal to markets around the world that the United States is serious about restoring confidence and stability to our financial system,” he said in a statement, a sentiment he echoed on Monday. “Without this rescue plan, the costs to the American economy could be disastrous.”

House Republicans had threatened to scuttle the deal, and proposed a vastly different approach that would have focused on insuring troubled debt rather than buying it. In the end, the insurance proposal was included on top of the purchasing power, but there is no requirement that the Treasury secretary use it, leaving them short of that goal.

It is virtually impossible to know the ultimate cost of the rescue plan to taxpayers, but Congressional leaders stressed that it would likely be far less than $700 billion. Because the Treasury will buy assets with the potential to resell them at a higher price, the government might even turn a profit.

That provision, pushed by House Democrats, was the last to be agreed to in a high-level series of talks that had top lawmakers and White House economic advisers hustling between offices just off the Capitol Rotunda until midnight on Saturday, scrambling to strike an agreement before Asian markets opened Sunday night.

The bill calls for disbursing the money in parts, starting with $250 billion followed by $100 billion at the discretion of the president. The Treasury can request the remaining $350 billion at any time, and Congress must act to deny it if it disapproves.

The agreement on a bailout plan was greeted with subdued optimism in early Asian trading on Monday. But shares sank by late Monday morning on renewed worries about the credit crisis, with a decision by HSBC to raise lending rates by 0.5 percent in Hong Kong triggering a drop of 2 percent in the Hang Seng Index in Hong Kong and 0.9 percent in the Kospi Index in Seoul.

The stock market in Taiwan is closed on Monday as Typhoon Jangmi passes over Taipei.

The dollar also strengthened in Asia and was worth 106.485 yen by midmorning on Monday after trading at 106.01 late Friday in New York. The euro weakened to $1.4506 on Monday from $1.4614 in late New York trading on Friday.

Ms. Pelosi, Treasury Secretary Henry M. Paulson Jr. and others taking part in the talks announced that they had clinched a tentative deal at 12:30 a.m. Sunday, exhausted and a little giddy after more than seven hours of sparring. There were several tense moments, none more so than when Mr. Paulson, a critical player, suddenly seemed short of breath and possibly ill. He was tired, but fine.

Trying to bring around colleagues who remained uncertain of the plan, its architects sounded the alarm about the potential consequences of doing nothing. Senator Judd Gregg of New Hampshire, the senior Republican on the Budget Committee and the lead Senate negotiator, raised the prospect of an economic catastrophe.

“If we don’t pass it, we shouldn’t be a Congress,” Mr. Gregg said.

Both major presidential candidates, Senator John McCain of Arizona, the Republican nominee, and Senator Barack Obama, the Democratic candidate, gave guarded endorsements of the bailout plan. Both Mr. McCain and Mr. Obama had dipped into the negotiations during a contentious White House meeting on Thursday.

On Sunday evening, both parties convened closed-door sessions in the House to review the plan, and conservative House Republicans remained a potential impediment.

But the party leadership was circulating information aimed at refuting some of the main criticisms of the bailout, indicating they were poised to support it. “I am encouraging every member of our conference whose conscience will allow them to support this bill,” said Representative John A. Boehner of Ohio, the Republican leader.

A series of business-oriented trade associations with influence with Republicans also began weighing in on behalf of the plan.

The United States Chamber of Commerce issued a statement on Sunday night that said it “believes the legislation contains the necessary elements to successfully remove the uncertainty and stem the turmoil that has plagued financial markets in recent weeks.”

Members of the conservative rank and file remained unconvinced.

“While it creates a gimmicky $700 billion installment plan, attempts to improve transparency, and has new provisions cloaked as taxpayer protections, its net effect is still a huge bailout of the financial sector that will snuff out the free market system,” said Representative Connie Mack, Republican of Florida.

Some Democrats bristled that they were now being called on to do the financial bidding of an administration they had viewed as previously uncooperative in dealing with executives who had performed irresponsibly or worse.

“Financial crimes have been committed,” said Representative Marcy Kaptur, Democrat of Ohio. “Now Congress is being asked to bail out the culprits.”

Throughout Sunday, small groups of lawmakers could be found around the Capitol exchanging their views on the plan. Some said they were willing to take a political risk and back it.

One, Representative Jim Marshall, a Georgia Democrat facing a re-election contest, told colleagues in a private meeting that he would vote for the measure to bolster the economy. “I am willing to give up my seat over this,” Mr. Marshall said, according to another person who was there.

The architects of the plan said they realized they were calling on Congress to cast a tough vote since lawmakers might not get credit for averting a financial crisis since some constituents will not believe one was looming.

“Avoiding a catastrophe won’t be recognized,” said Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee. “This economy is not going to have a blossoming on Wednesday.”

But he and others said the support from the two presidential contenders, Senators McCain and Obama, should provide some comfort to nervous lawmakers.

While the House was planning to act Monday, the Senate schedule was uncertain. A vote might not occur until Wednesday or later because of the Jewish holidays and possible procedural obstacles. But Senate vote-counters were confident they could get the needed support.

One of the more contentious issues was how to limit the pay of executives whose firms seek government aid, a top priority for Democrats and even some Republican lawmakers. But it was a concern for Mr. Paulson, who worried about discouraging firms from participating in the rescue plan, which seeks to convince companies to sell potentially valuable assets to the government at relatively bargain prices.

In the end, they settled on different rules for different companies depending on how they participate in the bailout. Firms that sell distressed debt directly to the government will be subject to tougher pay limits, including a mechanism to recover any bonuses or other pay based on corporate earnings that turn out to be inaccurate or fraudulent, and a ban on so-called “golden parachute” severance packages as long as the government has a stake in the firm.

Companies that participate in auctions, or other market-making mechanisms, and sell more than $300 million in troubled financial instruments to the government, will be barred from making any new employment contract with a senior executive that provides a golden parachute in the event of “involuntary termination, bankruptcy filing, insolvency or receivership.”

While some critics said the limits did not go far enough, lawmakers described the provision as a historic first step by Congress to limit exorbitant pay of corporate titans. “I think we wrote it as tight as we can get it in here,” Mr. Dodd said.

Congressional staff from both parties and Treasury worked through Friday night and into the predawn, before heading home for some sleep. They resumed work late Saturday morning, and Mr. Paulson arrived at the Capitol to join top lawmakers in Ms. Pelosi’s suite for a meeting at 3 p.m. At least a dozen major differences remained.

The meeting was initially described as a gathering of the five chief negotiators, Mr. Paulson, and a Democrat and Republican each from the House and Senate. But additional Democrats piled into the talks, angering Republicans who accused Democrats of packing the sessions.

For a brief, nerve-fraying moment at the outset, one administration participant said, Mr. Paulson surveyed the circus-like scene and wondered if everyone was committed to reaching a deal. It was quickly clear that they were — but not before so much information starting leaking out that the BlackBerrys of staff members were confiscated and collected in a trash bin.

At one point, Senator Charles E. Schumer, Democrat of New York, was thumping the table, demanding to release the $700 billion in installments. At another point, Senator Max Baucus, Democrat of Montana, was shouting at Mr. Paulson, accusing him of trying to undermine the limits on pay for executives.

Reporting was contributed by Keith Bradsher from Hong Kong, Robert Pear from Washington and Graham Bowley from New York.

    Bailout Plan in Hand, House Braces for Tough Vote, NYT, 30.9.2008, http://www.nytimes.com/2008/09/30/business/30bailout.html?hp

    Related > http://graphics8.nytimes.com/packages/pdf/business/20080928bailout_text.pdf

House Approves Nuclear Trade Deal With India

September 28, 2008
The New York Times
By REUTERS

WASHINGTON (Reuters) — The House of Representatives on Saturday approved an agreement to end the three-decade ban on nuclear trade with India, and Congressional leaders were optimistic about its passage in the Senate.

The agreement passed the House by a 298-117 vote, and the Democrats who control the Senate hoped to bring it to a vote there within days despite the opposition of some in their own party, Congressional aides said.

Congressional approval is the last hurdle to the pact, which the Bush administration believes will secure a strategic partnership with India, the world’s largest democracy; help India meet its rising energy demand; and open up a market worth billions.

President Bush said in a statement that House passage of the legislation was “another major step forward in achieving the transformation of the U.S.-India relationship.”

He urged the Senate to approve it quickly so he could sign it into law.

Critics argue that the deal undermines efforts to prevent the spread of nuclear weapons and sets a precedent allowing other nations to seek to buy such technology without submitting to the full range of global nonproliferation safeguards.

The agreement, which first had to gain approval from the 45-nation Nuclear Suppliers Group before coming to Congress, has drawn criticism from nonproliferation advocates because India has shunned the Nonproliferation Treaty meant to stop the spread and production of nuclear weapons, as well as a companion international pact banning nuclear tests.

The Nuclear Suppliers Group regulates the sale of nuclear fuel. It approved the deal this month after a campaign by the United States and despite concerns about setting off an arms race in Asia.

The deal is considered important for India’s continued economic growth and increased demand for electricity. Since it conducted its first nuclear test decades ago, India has not been able to buy nuclear fuel or technology on the world market.

The country is now running short of uranium for existing nuclear reactors because it does not have enough of a domestic supply to feed them. India’s leaders also want to substantially expand the civilian power program.

But even in India, the deal was dogged by intense political opposition, so much so that opponents of Prime Minister Manmohan Singh sought to bring down his government this year over this issue, saying it would impinge on India’s right to advance its strategic weapons program.

In the United States Senate, a vote has been held up by the objections of some Democrats, said Congressional aides who declined to name those blocking a vote.

The Senate majority leader, Harry Reid, Democrat of Nevada, urged his colleagues to drop their resistance, noting that under special rules for consideration of the nuclear deal it can ultimately be brought to a vote.

“For people who are concerned about the Indian nuclear agreement, and there are several senators that have concerns about that, all we would be doing is running out the time,” he said.

    House Approves Nuclear Trade Deal With India, NYT, 28.9.2008, http://www.nytimes.com/2008/09/28/washington/28nuke.html?hp

House Adopts Plan to Ease Offshore Drilling Ban

September 17, 2008
The New York Times
By CARL HULSE

WASHINGTON — The House on Tuesday night approved a measure that would ease a longstanding ban on offshore oil drilling and try to spur greater use of alternative fuels as Democrats and Republicans engaged in a bitter pre-election clash over America’s energy future.

Under the Democratic legislation, adopted by a vote of 236 to 189, oil companies would lose some tax benefits, utilities would be required to produce 15 percent of their electricity from renewable sources by 2020 and a ban on developing fuel from Rocky Mountain shale would be lifted.

The legislation, which faces significant hurdles to becoming law before Congress breaks at the end of the month, would allow drilling as close as 50 miles from the coastline if adjacent states agree and 100 miles out no matter a state’s position. It would impose stricter oversight on the agency that handles oil leasing and royalty payments after recent disclosures of improper relationships between its employees and oil industry representatives.

“We are opening up to 400 million acres off the Atlantic and Pacific coasts to drilling and expanding the availability of oil by at least 2 billion barrels,” said Representative Nick J. Rahall II, the West Virginia Democrat who leads the Natural Resources Committee. “And we have done so in a balanced, reasonable and responsible manner.”

Republicans, who have made political gains by portraying Democrats as flatly opposed to new drilling, said the measure was a sham intended to provide Democrats cover from voters furious over gas prices. They faulted it for failing to add incentives for coal and nuclear power and for not limiting environmental suits against drilling proposals. They also criticized Democrats for not negotiating with Republicans in writing the bill.

“We are engaged in exactly what the American people are sick of, and that is political games here in Washington that are intended to be political games and have no outcome,” said Representative John A. Boehner of Ohio, the Republican leader.

A Republican effort to sidetrack the measure with a procedural tactic was rebuffed on a vote that generally adhered to party lines. That cleared the way for approval of the proposal, which drew strong support from Democrats including conservatives from states with strong oil and gas industries. On the final vote, 221 Democrats and 15 Republicans supported it; 176 Republicans and 13 Democrats were opposed.

“It represents a critical turning point,” said Representative Dan Boren, Democrat of Oklahoma, who praised the bill for provisions that would encourage greater use of natural gas. “Today is the day we begin to open our domestic opportunities.”

Though Republicans derided the measure, saying it kept too much of the Outer Continental Shelf and the underlying reserves off limits to drilling, the decision to entertain expanded offshore drilling was a stark reversal for Democrats, who have supported a coastal drilling ban since 1982. They were motivated by the Republican attacks and by the view that keeping the stricter ban would be unrealistic this year. Relaxing the ban became the party’s fall-back position.

Democrats said Republicans were left frustrated because the bill robbed them of a chief line of attack in allowing Democrats to vote for new drilling in conjunction with clean energy initiatives.

“This is a classic case where in the interests of doing good politics, we also did good policy,” said Representative Rahm Emanuel of Illinois, chairman of the House Democratic Caucus.

But Republicans called the entire exercise political, saying Democrats were willing to consider new offshore drilling only because they were certain the bill would not become law.

“It is a Peter Pan story,” said Representative Don Young of Alaska, who led the Republican opposition to the measure. “It is a figment of the imagination. It is a political gimmick.”

The outlook for the measure is uncertain with only two weeks before Congress is set to break until at least the November elections and perhaps until next year. The Senate is preparing to take up a similar bill, but even if it averts a filibuster, it seems unlikely that the bills could be reconciled before the break. And the White House on Tuesday threatened a veto of the House plan.

The Senate was to initially consider extending a series of $17 billion in tax breaks for renewable energy like wind and solar power and then try to sort through proposals that could include the House bill, a bipartisan Senate plan that would allow new drilling in the Gulf of Mexico off the Florida coast and a separate Republican plan.

Among other objections, House Republicans joined industry in criticizing the measure because it would eliminate about $18 billion in tax breaks for oil companies, including a manufacturing deduction of particular benefit to large firms. The savings from the oil companies would be diverted to pay for tax breaks and incentives for renewable fuels, vehicles that use alternative energy and other fuel efficiency programs and research.

On an issue that has been contentious in Western states, the measure would allow the federal government to proceed with leasing public lands for the possible production of oil from shale as long as the states agree. The move, which drew the opposition of conservation groups because of its possible impact in Colorado, Utah and Wyoming, was made to ensure the votes of some wavering Western Democrats.

The measure also seeks to recapture past underpayments of royalties by oil companies by calling on them to renegotiate the old agreements if they intend to bid on new leases. In the bill, Democrats, who contend that oil companies are now letting leases sit idle rather than producing oil and gas, would also require oil companies to pursue their holdings or risk losing them.

In the wake of an ethics scandal in the Minerals Management Service involving accusations of financial wrongdoing, cocaine use and sexual misconduct, the legislation would make it a crime for oil company officials holding leases to provide gifts and favors to employees of the agency, which oversees oil leasing, and would institute civil fines for companies that engage in such practices. It would also hold agency employees to new standards and require drug testing.

    House Adopts Plan to Ease Offshore Drilling Ban, NYT, 17.9.2008, http://www.nytimes.com/2008/09/17/washington/17cong.html?hp

Earmarks Persist in Spending Bills for 2009

June 27, 2008
The New York Times
By RON NIXON

WASHINGTON — Despite a pledge by Congressional leaders to reduce pork-barrel projects, new information shows that both the number and amount of earmarks have increased in several spending bills now making their way through Congress.

The amount of the earmarks in the House version of the labor, health and human services appropriations bill for the 2009 fiscal year, for example, has jumped to $618.8 million from $277.9 million compared with the bill in 2008, according to Citizens Against Government Waste, a nonpartisan watchdog group in Washington.

In the Interior Department spending bill, earmarks increased to $134.9 million from $111 million from last year. Those amounts might change when the Appropriations Committee approves those bills. A spokeswoman from the committee said the number and amount of earmarks would be kept at 2008 levels.

A few years ago, the Department of Homeland Security bill had no earmarks; the new House bill has more than 100. In all, lawmakers requested 3,796 earmarks worth about $2.7 billion in seven spending bills.

The debate over earmarks has heated up in recent years after they figured into several Congressional scandals.

President Bush has threatened to veto spending bills if the number and cost of earmarks were not cut in half. Mr. Bush said that earmarks were wasteful and that the projects they financed typically lacked transparency and oversight.

The number of earmarks did decline last year after lawmakers, under the leadership of Speaker Nancy Pelosi, mandated that members publicly disclose their financing requests.

“But these increases we are seeing clearly sets back any steps toward reform,” said Leslie Paige, a spokeswoman for Citizens Against Government Waste. “We’re back to where we were before.”

Supporters of the practice say Congress has the right to appropriate financing to organizations and programs that agencies might otherwise overlook. But Representative Jeff Flake, Republican of Arizona and a longtime critic of earmarks, said the budget process had become a spoils system.

“It’s become a way for lawmakers to award the lobbyists and others who give to their campaigns,” Mr. Flake said.

House Democrats lead the way in earmark requests worth billions of dollars in the seven bills for which information is available, according to a review of the data by The New York Times.

Representative Peter J. Visclosky, Democrat of Indiana and chairman of the House Appropriations Subcommittee on Energy and Water Development, requested more than $38 million in earmarks in the seven bills, including $850,000 for programs at a Y.M.C.A. in Gary, Ind.

The House majority whip, James E. Clyburn, Democrat of South Carolina, requested about $31 million in earmarks, including two $10 million earmarks in the House energy bill for a program to enhance science at historically black colleges and universities and an Army Corps of Engineers construction project on two lakes in South Carolina.

A spokeswoman for Mr. Clyburn, Kristie Greco, said both earmarks were for services needed by his constituency.

“The science enhancement program is to increase the number of scientists and engineers at black colleges and universities, and the Corps of Engineers earmarks would address drinking water problems in areas where many people have wells,” she said.

Calls to the offices of several congressmen to discuss their earmarks were not returned.

Ms. Pelosi, Democrat of California, requested more than $12 million in earmarks and the House majority leader, Steny H. Hoyer, asked for more than $9 million for projects in Maryland. Representative David R. Obey, chairman of the House Appropriations Committee, requested about $20 million in earmarks.

Several Republican members also had projects in the bills, despite recent calls from the Republican leadership for a one-year ban on earmarks.

Representative Harold Rogers of Kentucky, a Republican who is the ranking minority member of the Appropriations Subcommittee on Homeland Security, asked for more than $31 million for a variety of projects in his rural district. That included $11 million for the National Institute for Hometown Security, a project he helped to create four years ago to work on community-based solutions to protect infrastructure, according to budget documents.

C. W. Bill Young, Republican of Florida, asked for more than $14 million in earmarks, including $7 million for a Corps of Engineers project in Pinellas County.

It is unclear if Democratic leaders will send any of the 12 annual spending bills to Mr. Bush before he leaves office because of his veto threat.

And Thursday added even more uncertainty to the picture when the House Appropriations Committee adjourned for the Fourth of July recess before acting on two spending bills.

The committee’s chairman, Mr. Obey, Democrat of Wisconsin, threatened to halt the appropriations process after Republicans tried to force a vote on the spending bill for the Interior Department so they could offer several amendments that they said would increase domestic energy production and lower gas prices.

    Earmarks Persist in Spending Bills for 2009, NYT, 27.6.2008, http://www.nytimes.com/2008/06/27/washington/27earmarks.html?hp

House Passes Bill on Wiretap Powers

June 21, 2008
The New York Times
By ERIC LICHTBLAU and DAVID STOUT

WASHINGTON — The House on Friday overwhelmingly approved a bill overhauling the rules on the government’s wiretapping powers and conferring what amounts to legal immunity to the telephone companies that took part in President Bush’s program of eavesdropping without warrants after the terrorist attacks of Sept. 11, 2001.

The bill cleared the House by 293 to 129, with near-unanimous support from Republicans and substantial backing from Democrats. It now goes to the Senate, which is expected to vote next week.

“Our intelligence officials must have the ability to monitor terrorists suspected of plotting to kill Americans and to safeguard our national security,” said Representative John A. Boehner of Ohio, the Republican minority leader. “This bill gives it to them.”

The Democratic majority leader, Representative Steny H. Hoyer of Maryland, was considerably more restrained in his support of the bill, calling it the best compromise possible “in the current atmosphere.”

The vote followed months of wrangling and came a day after Democratic and Republican leaders reached agreement.

The deal, expanding the government’s powers to spy on terrorism suspects in some major respects, would strengthen the ability of intelligence officials to eavesdrop on foreign targets. It would also allow them to conduct emergency wiretaps without court orders on American targets for a week if it is determined that important national security information would otherwise be lost. If approved by the Senate, as appears likely, the agreement would be the most significant revision of surveillance law in 30 years.

The agreement would settle one of the thorniest issues in dispute by providing immunity to the phone companies in the Sept. 11 program as long as a federal district court determined that they received legitimate requests from the government directing their participation in the program of wiretapping without warrants.

With AT&T and other telecommunications companies facing some 40 lawsuits over their reported participation in the wiretapping program, Republican leaders described this narrow court review on the immunity question as a mere “formality.”

“The lawsuits will be dismissed,” Representative Roy Blunt of Missouri, the No. 2 Republican in the House, predicted with confidence on Thursday.

The proposal — particularly the immunity provision — represents a major victory for the White House after months of dispute.

“I think the White House got a better deal than even they had hoped to get,” said Senator Christopher S. Bond, Republican of Missouri, who led the negotiations.

President Bush said on Friday morning that he was pleased about the deal and the impending passage in Congress. “The enemy that struck us on Sept. 11 is determined to strike us again,” Mr. Bush said, urging quick action by the Senate.

While final passage seems almost certain, the plan will nonetheless face opposition from lawmakers on both political wings, with conservatives asserting that it includes too many checks on government surveillance powers and liberals asserting that it gives legal sanction to a wiretapping program that they maintain was illegal in the first place.

Senator Russell D. Feingold, Democrat of Wisconsin, who pushed unsuccessfully for more civil liberties safeguards in the plan, called the deal “a capitulation” by his fellow Democrats.

But Democratic leaders, who squared off against the White House for more than five months over the issue and allowed a temporary surveillance measure to expire in February, called the plan a hard-fought bargain that included needed checks on governmental abuse.

“It is the result of compromise, and like any compromise is not perfect, but I believe it strikes a sound balance,” said Mr. Hoyer, who helped draft the plan.

Perhaps the most important concession that Democratic leaders claimed was an affirmation that the intelligence restrictions were the “exclusive” means for the executive branch to conduct wiretapping operations in terrorism and espionage cases. Speaker Nancy Pelosi had insisted on that element, and Democratic staff members asserted that the language would prevent Mr. Bush, or any future president, from circumventing the law. The proposal asserts “that the law is the exclusive authority and not the whim of the president of the United States,” Ms. Pelosi said.

In the wiretapping program approved by Mr. Bush after the Sept. 11 attacks, the White House asserted that the president had the constitutional authority to act outside the courts in allowing the National Security Agency to focus on the international communications of Americans with suspected ties to terrorists and that Congress had implicitly authorized that power when it voted to use military force against Al Qaeda.

Among other important provisions in the 114-page plan, Democrats also pointed to requirements that the inspectors general of several agencies review the security agency’s wiretapping program, that the government obtain individual court orders to wiretap Americans who are outside the United States and that the secret court overseeing wiretaps give advance approval to the government’s procedures for wiretapping operations.

Under a temporary plan that Congress approved last year, the court had to approve those procedures only months after wiretapping had begun.

The wiretapping plan agreed upon Thursday would expire at the end of 2012, unless Congress renewed it.

The proposal also seeks to plug what the Bush administration maintained was a dangerous loophole by no longer requiring individual warrants for wiretapping purely foreign communications, like phone calls and e-mail messages that pass through American telecommunications switches. The government would now be allowed to use broad warrants to eavesdrop on large groups of foreign targets at once.

In targeting and wiretapping Americans, the administration would have to get individual court orders from the intelligence court, but in “exigent” or emergency circumstances it would be able to go ahead for at least seven days without a court order if it asserted that “intelligence important to the national security of the United States may be lost.”

White House officials said that the new emergency provisions applied only to foreign wiretapping, but Democratic officials said they interpreted the proposal to apply to domestic surveillance operations as well.

Under the current law, the government can conduct an emergency wiretap for only three days, but Democrats maintained that the new seven-day allowance included tougher standards for the government to meet in asserting an emergency.

The arcane details of the proposal amount to a major overhaul of the landmark surveillance law known as the Foreign Intelligence Surveillance Act, which Congress passed in 1978 after the abuses of the Watergate era. But much of the debate over the bill in the last six months has been dominated by the separate question of whether to protect the phone companies from legal liability for their role in the eavesdropping program.

On that score, the bipartisan proposal marks a clear victory for the White House and the phone companies.

The proposal allows a district judge to examine what are believed to be dozens of written directives given by the Bush administration to the phone companies after the Sept. 11 attacks authorizing them to engage in wiretapping without warrants. If the court finds that such directives were in fact provided to the companies that are being sued, any lawsuits “shall be promptly dismissed,” the proposal says.

Even Democratic officials, who had initially opposed giving legal immunity to the phone companies, conceded there was a high likelihood that the lawsuits would have to be dismissed under the standards set out in the proposal. That possibility infuriated civil liberties groups, which said the cursory review by a district judge would amount to the de facto death of the lawsuits.

“No matter how they spin it, this is still immunity,” said Kevin Bankston, a senior lawyer for the Electronic Frontier Foundation, a pro-privacy group that is a plaintiff suing over the wiretapping program. “It’s not compromise; it’s pure theater.”

    House Passes Bill on Wiretap Powers, NYT, 21.6.2008, http://www.nytimes.com/2008/06/21/washington/21fisacnd.html?hp

House Approves Veterans’ Education Aid in a Deal on War Spending

June 20, 2008
The New York Times
By CARL HULSE

WASHINGTON — The House voted on Thursday to offer what amounts to a free college education to the new generation of military veterans as part of a costly legislative package that finances the war in Iraq through the end of President Bush’s tenure and into the early months of the next administration.

In allowing approval of about $162 billion for operations in Iraq and Afghanistan, Democrats essentially stopped trying to use Pentagon spending as a tool to force Mr. Bush to withdraw combat troops or impose other conditions on his handling of the war.

“The president simply will not sign such legislation,” said Speaker Nancy Pelosi, an opponent of the war. “Our troops are in harm’s way. They need to be taken care of.”

Under an arrangement that allowed separate votes on the war money and a series of domestic initiatives, the war money was approved 268 to 155, with mainly Republicans backing it. Ms. Pelosi and 150 other Democrats opposed the unrestricted war money.

A separate package of domestic initiatives including the new G.I. benefits, a 13-week extension of unemployment aid for millions of Americans and $2.6 billion for Midwestern flood relief was approved 416 to 12.

The overall measure included $186.5 billion in spending along with the estimated $8 billion costs of the unemployment benefits and almost $63 billion for the college aid for veterans over the next decade.

Frustrated in their efforts to win a troop pullout, Democrats pushed the plan to grant military personnel new rewards once they leave the service, advocating a substantial expansion of college aid for those who have experienced “especially arduous” duty in the aftermath of the Sept. 11 attacks.

Under the program, those who serve at least three years on active duty will qualify for educational assistance equivalent to tuition and fees at a leading public university in their state along with housing assistance, money for books, school supplies and tutorial assistance.

At the request of the administration, which initially opposed the veterans’ plan, the bill would also allow those who serve longer in the military to transfer unused education aid to immediate family members: a provision that added about $10 billion to the estimated costs.

“This legislation will build upon the G.I. Bill’s historic legacy of ensuring brighter futures for service members and their families,” the White House said in a statement. “We urge both the House and Senate to immediately pass this bipartisan agreement.”

The deal, fashioned quickly Wednesday by House leaders with White House support, must still be approved by the Senate, which will consider it next week. Senators in both parties said initial indications were that most of their colleagues were prepared to back it even though some spending initiatives they favored had been dropped.

The bill includes $5.8 billion for levee construction in Louisiana, $210 million to cover additional costs for the 2010 census, $400 million for science programs and about $10 billion for foreign aid programs. The costs, coming at the time of a mounting federal deficit, drew objections from fiscal conservatives in both parties, particularly since the veterans’ program was not paid for.

In allocating enough money to continue the war into the summer of 2009, Republicans and Democrats showed they were eager to dispose of the politically charged issue before the November elections.

The money will also give the next president time to settle into office before being confronted with the financing issue.

But some Democrats were clearly disappointed that they had come up short in repeated efforts to force a troop withdrawal. “For me this is one compromise too many, one cave-in too many,” said Representative Jim McGovern, Democrat of Massachusetts.

Other Democrats feared a backlash from voters who supported Democrats in 2006 in hopes of ending the war. “I am concerned that some people out there might be angry,” said Representative José E. Serrano, Democrat of New York.

Ms. Pelosi said House Democrats had done what they could. She blamed Senate Republicans for thwarting the anti-war push, saying that most Republicans stood solidly with Mr. Bush and denied Democrats the 60 votes needed to overcome filibusters.

“The 60-vote requirement to bring up legislation in the Senate has prolonged this war,” said Ms. Pelosi, who called the result a tragedy.

Republicans said that improving conditions in Iraq validated their decision to back the president in continuing the war. “Unilateral defeat, unilateral surrender, which is what the Democrats have wanted, will leave us with an unstable Iraq, a place where Al Qaeda would have had free access and a base of operations,” said Representative John A. Boehner of Ohio, the Republican leader.

He and fellow Republicans came to the negotiating table in response to growing unease in the party ranks over being seen as blocking added jobless aid when economic anxiety is running high back home. Dozens of Republicans joined House Democrats last week in backing the unemployment money in a separate bill and the veterans’ plan had broad support as well.

While conceding the inability to set a withdrawal date, Democrats said they had won significant concessions in the bill, noting that Mr. Bush had not only initially opposed the veterans’ education plan, but also faulted the extension of unemployment benefits and vowed to oppose additional domestic spending.

    House Approves Veterans’ Education Aid in a Deal on War Spending, NYT, 20.6.2008, http://www.nytimes.com/2008/06/20/washington/20spend.html

House Leaders Agree on War Funding

June 19, 2008
The New York Times
By CARL HULSE

WASHINGTON — House leaders struck a bipartisan deal on Wednesday night on a major spending measure that would provide money for the war in Iraq through the end of the Bush administration, establish a significant new education benefit for veterans, and meet Democratic demands for added unemployment benefits.

The bill, which could be voted on as early as Thursday in the House, would effectively bring to a close the two-year battle between President Bush and Congressional Democrats over war financing by allocating about $163 billion for combat operations in Iraq and Afghanistan through early next year without imposing conditions like a withdrawal deadline.

White House officials took part in the talks that produced the agreement, suggesting the president was willing to sign the emerging legislation.

“I think we have an agreement,” said Representative Steny H. Hoyer of Maryland, the majority leader, who worked out the final deal in talks with Representative John A. Boehner of Ohio, the Republican leader, as well as senior members of both parties from the Appropriations and Ways and Means Committees.

The measure would entitle veterans, those who enlisted after the Sept. 11 attacks and served three years or more, to what amounts to four years of college education at a state university. To win Republican support, House leaders dropped a plan to pay the $50 billion cost of the program through a tax on affluent Americans and also agreed that some of the benefits could be transferred to immediate family members.

In response to a Democratic push to aid laid-off workers whose unemployment pay is running out, the bill would extend jobless benefits for 13 weeks in all states, according to Congressional officials briefed on the contents of the measure. But in a concession, they said, the bill would drop a plan for an additional 13 weeks of benefits for the hardest-hit states and reinstate a requirement that workers must have put in 20 weeks on the job to qualify.

The bill, one of the few must-pass measures facing a highly partisan election-year Congress, would also allocate about $2.5 billion to deal with the flooding in the Midwest and provide money for the continuing recovery in Louisiana from Hurricane Katrina. It would also block a series of new administration rules that lawmakers said would cut Medicaid health services for the poor.

“This bill is a real victory,” Mr. Boehner said. “It gets our troops the funding they need for success, without hamstringing our commanders in the field with politically motivated war restrictions. It provides new resources to help our veterans returning from Iraq and Afghanistan get a better education, without raising taxes unnecessarily on the American people. It also does not include billions in unrelated wasteful Washington pork that was added by Senate Democrats.”

While the measure does not include most of the restrictions on war spending long opposed by the administration, Democratic aides said the measure would retain a prohibition on permanent American military bases in Iraq and also call on the Iraqi government to share equally in the cost of rebuilding the country.

The willingness of House Republicans and Democrats to reach a deal showed that both sides concluded it was expedient for them to dispose of politically troublesome issues like the war money and the unemployment aid. Mr. Bush, should he sign the measure, would be relenting as well since he had earlier indicated he would reject the veterans program and the unemployment aid.

Senate leaders were not directly involved in the talks, and the tentative deal does not include some of the spending programs that senators had included in their own version, leaving it in question whether the Senate would go along with the House agreement. But the plan did take into account the Senate view that the new G. I. benefit promoted by Senator Jim Webb, Democrat of Virginia, not be underwritten through a new tax.

“Early reports indicate the House will send us a supplemental that includes a G. I. Bill, extends unemployment insurance and provides disaster relief — three important priorities we have been pushing for some time,” said Jim Manley, a spokesman for Senator Harry Reid of Nevada, the majority leader. “We look forward to reviewing the House’s complete proposal, and we will take it up quickly once we receive it.”

The agreement was something of a surprise because many lawmakers and aides expected the House to pass a version that would draw little Republican support, necessitating another round of negotiations and votes. But the speaker, Nancy Pelosi, made it clear in recent days that she wanted a measure that Congress could pass and would be signed by the president before Congress breaks for the Fourth of July next week. The Pentagon has raised the possibility that workers might have to be furloughed if Congress did not act by then.

    House Leaders Agree on War Funding, NYT, 19.6.2008, http://www.nytimes.com/2008/06/19/washington/19spend.html?ref=washington

House Passes Bill to Sue OPEC Over Oil Prices

May 20, 2008
Filed at 1:53 p.m. ET
By REUTERS
The New York Times

WASHINGTON (Reuters) - The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.

The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto.

The legislation also creates a Justice Department task force to aggressively investigate gasoline price gouging and energy market manipulation.

"This bill guarantees that oil prices will reflect supply and demand economic rules -- instead of wildly speculative and perhaps illegal activities," said Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation.

The White House opposed the bill, saying that targeting OPEC investment in the United States as a source for damage awards "would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners."

The administration said less oil going to refineries would limit available gasoline supplies and raise fuel prices.

The Senate would still have to approve the House measure.

The Senate previously approved similar legislation as part of a broad energy bill. However, the OPEC-suing provision was removed after White House opposition in order to get the underlying energy legislation signed into law.

(Reporting by Tom Doggett; Editing by Walter Bagley)

    House Passes Bill to Sue OPEC Over Oil Prices, NYT, 20.5.2008, http://www.nytimes.com/reuters/washington/politics-congress-opec.html

House Rejects Immunity in Eavesdropping Bill

March 14, 2008
The New York Times
By ERIC LICHTBLAU

WASHINGTON — After its first secret session in a quarter-century, the House on Friday rejected retroactive immunity for the phone companies that took part in the National Security Agency’s warrantless eavesdropping program after the Sept. 11 attacks, and it voted to place greater restrictions on the government’s wiretapping powers.

The decision, by a largely party-line vote of 213 to 197, is one of the few times when Democrats have been willing to buck up against the White House on a national security issue. It also ensures that the months-long battle over the government’s wiretapping powers will drag on for at least a few more weeks and possibly much longer.

With President Bush and Democratic leaders squaring off almost daily on the wiretapping question, neither side has shown much inclination to budge. The question now moves to the Senate, where lawmakers passed a bill last month that was much more to the liking of the White House. Unlike the bill approved Friday by the House, it would give legal immunity to the phone providers that helped in the National Security Agency’s wiretapping program, which President Bush says is essential to protect national security.

The House bill approved Friday includes three key elements: it would refuse retroactive immunity to the phone companies, providing special authority instead for the courts to decide the liability issue; it would add additional judicial restrictions on the government’s wiretapping powers while plugging certain loopholes in foreign coverage; and it would create a Congressional commission to investigate the N.S.A. program.

Even if the House bill were to gain approval by the Senate — a prospect that appears unlikely — a veto by the White House appears certain. The margin by which the House vote was approved was far short of the two-thirds needed to override a veto.

A White House Press Secretary, Tony Fratto, called the House action “a significant step backward in defending our country against terrorism.” But he added: “The good news is that the House bill will be dead on arrival in the Senate and, in any event, would be vetoed by the president if it ever got to his desk.”

Even before the first vote was cast in the House, Mr. Bush assailed the Democrats’ proposal in remarks at the White House on Thursday, calling it “a partisan bill that would undermine America’s security.”

“Companies that may have helped us save lives should be thanked for their patriotic service, not subjected to billion-dollar lawsuits that will make them less willing to help in the future,” the president said. “The House bill may be good for class action trial lawyers, but it would be terrible for the United States.”

In fact, while some private lawyers are assisting in the litigation, the groups leading the efforts, including the Electronic Frontier Foundation and the American Civil Liberties Union, are nonprofit advocacy groups.

Mr. Bush also blasted the requirement in the legislation to create a bipartisan commission with subpoena power to examine the workings of the N.S.A.’s program. Democrats say it may be the only way they will learn how the program was really run, but Mr. Bush called it “a redundant and partisan exercise that would waste our intelligence officials’ time and taxpayers’ money.”

House Speaker Nancy Pelosi was sharply critical of the president’s assessment that the legislation would not make America safer. “The president is wrong, and he knows it,” she said on Thursday.

Republicans convinced Democratic leaders to convene a secret session of the House on Thursday evening to discuss classified intelligence related to the phone companies’ role in the N.S.A. program. Republicans said the session was critical to understand what role the companies had played, but Democrats accused their counterparts of political grandstanding. It was the first secret session since 1983, when the House met behind closed doors to consider funding for the contra rebels in Nicaragua.

An earlier version of this article reported the results of a preliminary vote on the bill, not the final vote.

    House Rejects Immunity in Eavesdropping Bill, NYT, 14.3.2008, http://www.nytimes.com/2008/03/14/washington/14cnd-fisa.html?hp

Congress Questions Executives on Compensation
 

March 7, 2008
The New York Times
By JENNY ANDERSON and ERIC DASH

WASHINGTON — Three prominent financial executives were summoned before Congress on Friday to face questions about the huge paydays that they earned from the subprime mortgage boom, even as their companies have lost billions of dollars and thousands of borrowers have lost their homes.

Two of the three lost their jobs last fall after the collapse of the subprime market — E. Stanley O’Neal, Merrill Lynch’s chairman and chief executive, and Charles O. Prince III, his counterpart at Citigroup — but left with sizable pay packages. The other, Angelo R. Mozilo, the founder and chief executive of Countrywide Financial, presided over the demise of a once high-flying company that is now being acquired by Bank of America.

They are appearing at a hearing of the House Committee on Oversight and Investigations, which, with its inquiry into supersized ballplayers winding down, once again turned its attention to supersized pay.

Along with the three executives, the chairmen of the compensation committees at all three companies were also scheduled to testify, along with a panel of academics, governance advocates and state and municipal officials.

Executive compensation has emerged as a hot topic in Washington in recent years. Surveys show that Americans, regardless of their income or political leanings, overwhelmingly believe that their business leaders are overpaid.

“There seem to be two economic realities operating in our country today," Representative Henry Waxman, Democrat of California, the committee chairman, said as the hearing opened Friday morning. “Most Americans live in a world where economic security is precarious and there are real economic consequences for failure. But our nation’s top executives seem to live by a different set of rules.”

The question before the committee, he said, was this: “When companies fail to perform, should they give millions of dollars to their senior executives?”

The discussion is expected to shed some light on how Wall Street’s compensation philosophy may have contributed to the mortgage boom. Corporate boards and compensation committees agreed to lucrative bonus plans that gave their leaders strong incentives to take big risks. Executives aggressively pushed their companies into lucrative businesses, like underwriting subprime mortgages and packaging the loans into complex securities. Then, as the housing and credit markets plummeted, those profits turned into enormous losses for shareholders. Wall Street’s top executives still kept their pay.

“With executive compensation you get what you pay for and you pay for what you get,” Nell Minow, editor of the Corporate Library, an independent research firm specializing in corporate governance, said in testimony prepared for the hearing. “If you make compensation all upside and no downside, that will affect the executives assessment of risk. It will make it clear to him that he can easily offload the risk onto shareholders. It’s heads they win, tails we lose.”

Mr. Mozilo’s pay drew the most scrutiny from members of Congress. He has taken home more than $410 million since becoming chief executive in 1999, including several stock sales made under an automatic plan while the company was buying back shares.

Federal securities regulators have been scrutinizing those trades. And in a report released Thursday, Congressional investigators found that the use of a flawed peer group and easy bonus targets helped inflate his pay. He also had been entitled to a $37.5 million severance package, though he forfeited that in January, shortly after Congress requested that he testify.

Mr. O’Neal and Mr. Prince each landed a windfall when they resigned.

Mr. O’Neal retained more than $161 million after he was ousted in October on top of the $70 million he took home during his four-year tenure. The bulk of the exit pay was linked to previously earned benefits and stock since his departure was deemed a retirement; he did not receive any severance pay. Merrill Lynch, meanwhile, has announced write-offs totaling more than $10.3 billion and watched its stock price fall sharply.

Mr. Prince collected $110 million while presiding over the evaporation of roughly $64 billion in market value. He left Citigroup in November with an exit package worth $68 million, including $29.5 million in accumulated stock, a $1.7 million pension, an office and assistant, and a car and driver. Citigroup’s board also awarded him a cash bonus for 2007, largely based on his performance in 2006 when the bank’s results were better, worth about $10 million. Citigroup has announced write-offs worth roughly $20 billion and seen its share plummet over 60 percent from last year’s high.

“From a shareholder perspective, it is not possible to justify that payment,” Ms. Minow said of the $10 million bonus to Mr. Prince, though she added, “His sins were so much smaller than the other people we’re talking about.”

In his prepared testimony, Mr. Prince focused on his humble beginnings, as the first member of his family to go to college, and the plaudits that Citigroup received for improving corporate governance on his watch.

“Last fall, it became apparent that the risk models which Citigroup, the various rating agencies and the rest of the financial community used to assess certain mortgage backed securities were wrong,” he said. “As C.E.O., I was ultimately responsible for the actions of the company, including risk models that eventually proved inadequate.”

Since his resignation, he said, “some have raised questions about my compensation, and much of the information reported in the media is incomplete or inaccurate."

Mr. O’Neal, too, said reports about his compensation package were inaccurate. “The reality is that I received no severance package,” he said in prepared testimony.

Emphasizing that the compensation process at Merrill was “appropriate” and “independent,” he said: “It is true that top executives at public companies in the United States, especially in the financial services industry, are highly compensated. But a great percentage of that compensation, certainly for me, was and is at risk. When the business does well, all shareholders do well. But if the businesses does not do well, the value of that compensation can plummet."

And Mr. Mozilo, noting that “our stock price appreciated over 23,000 percent” from 1982 to 2007, said he received performance-based bonuses approved by shareholders and exercised options as he prepared for retirement. “In short, as our company did well, I did well,” he said.

Other executives at financial companies could collect similarly lavish parachutes. James E. Cayne will retire with stock and options worth $560 million when he steps down from Bear Stearns, according to a severance analysis in late February by James F. Reda & Associates, an independent compensation-consulting firm in New York. It found that Kerry K. Killinger, Washington Mutual’s chief executive, might get worth $58 million and $74 million if the company is sold. John J. Mack, Morgan Stanley’s chairman and chief executive, might walk away with as much as $148 million, largely from previously earned stock.

Regulators are focusing on the link between solid pay practices and sound risk management. At a conference in New York last month, Randall S. Kroszner, a Federal Reserve Board governor, urged financial institutions to consider altering their compensation policies to include some types of deferred pay. He also suggested that any new risk management guidelines for the industry touch on incentive compensation.

“It is up to financial institutions themselves not bank supervisors to decide how compensation should be structured,” he said. “But managers and boards of directors should understand the consequence of providing too many short-term and one-sided incentives.”

Meanwhile, a recent Internal Revenue Service rule reversal will lead many companies eliminate guaranteed bonuses and equity awards in severance contracts.

Starting next year, the agency said it would no longer allow companies to receive a tax deduction for any performance-based bonus, restricted stock, or other incentive payout if it would automatically be paid out if a top executive was terminated. Senator Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, has floated the idea of eliminating that tax deduction altogether.

Jenny Anderson reported from Washington, and Eric Dash from New York.

    Congress Questions Executives on Compensation, NYT, 7.3.2008, http://www.nytimes.com/2008/03/07/business/07cnd-pay.html?hp

House Votes to Issue Contempt Citations

February 15, 2008
The New York Times
By PHILIP SHENON

WASHINGTON — The House voted Thursday to issue contempt citations against the White House chief of staff and a former White House counsel for refusing to cooperate in an investigation into the mass firings of federal prosecutors.

The vote to hold Joshua B. Bolten, the chief of staff, and Harriet E. Miers, the former counsel, in contempt of Congress followed bitter partisan wrangling on the House floor, including a Republican walkout from the chamber, and moved House Democrats closer to a constitutional showdown with President Bush.

The 223-to-32 vote to issue the contempt citations, the first approved by Congress against the executive branch since the Reagan administration, is likely to move the dispute to a federal courtroom, with House lawyers calling on a judge to enforce subpoenas against Mr. Bolten and Ms. Miers. The Senate is weighing similar contempt charges against Karl Rove, Mr. Bush’s former political adviser.

Mr. Bolten and Ms. Miers were subpoenaed by the House Judiciary Committee for information about their part in the dismissal of several United States attorneys last year for what appear to have been political reasons. The uproar over the firings led to bipartisan calls in Congress for the resignation of former Attorney General Alberto R. Gonzales, who stepped down last summer.

As House Republicans protested the vote with an angry walkout from the House floor, the White House joined in expressions of outrage over the contempt citations.

Dana Perino, the White House spokeswoman, said that the White House had tried to compromise with House Democrats to help lawmakers obtain information from Mr. Bolten and Ms. Miers short of public testimony. “Many of the things that they asked for, we were willing to give,” Ms. Perino said. “But instead, they’re going to waste time on this partisan, futile act.”

A Congressional subpoena would normally be enforced by the Justice Department. But the White House and Mr. Gonzales’s successor, Attorney General Michael B. Mukasey, have said they would not pursue contempt charges against current and former White House officials who, they believe, are shielded from testimony by executive privilege.

That appeared to leave two options for the House — seek the help of the federal judiciary to try to enforce the contempt citations or, less likely, hold its own trial on Capitol Hill for Mr. Bolten and Ms. Miers, similar to an impeachment trial. The House measure passed Thursday gave explicit authority to House lawyers to “initiate or intervene in judicial proceedings” in federal court to enforce the subpoenas.

In a statement responding to the House vote, the Justice Department suggested that Mr. Mukasey had not made a final decision to rebuff the House request but noted that “he did not expect that he would act in contravention of longstanding department precedent” against enforcing subpoenas against executive branch officials.

The chairman of the Judiciary Committee, Representative John Conyers Jr., a Michigan Democrat, said Thursday on the House floor that he had no choice but to pursue the contempt citations.

“The resolutions we are considering today are not steps that I as chairman take easily or lightly, but they are necessary to protect our constitutional prerogatives as a co-equal branch of government,” Mr. Conyers said.

House Republican leaders described the contempt vote as a political ploy that drew time away from what they described as a more important debate over extending a federal law to allow eavesdropping on domestic telephone calls and e-mail in pursuit of terrorists.

“We have space on the calendar today for a politically charged fishing expedition but not space for a bill that would protect the American people from terrorists who want to kill us,” said Representative John A. Boehner of Ohio, the Republican House leader.

Mr. Boehner then instructed other Republicans to exit the chamber in protest. “Let’s just get up and leave,” Mr. Boehner said before walking out with scores of his party’s members.

The Senate has not scheduled a vote on the floor on the contempt citation that was approved by the Senate Judiciary Committee in December against Mr. Bolten and Mr. Rove, also over demands for information about the firing of the United States attorneys.

    House Votes to Issue Contempt Citations, NYT, 15.2.2008, http://www.nytimes.com/2008/02/15/washington/15contempt.html?hp

House Leaves Surveillance Law to Expire

February 15, 2008
The New York Times
By CARL HULSE

WASHINGTON — The House broke for a week’s recess Thursday without renewing terrorist surveillance authority demanded by President Bush, leading him to warn of risky intelligence gaps while Democrats accused him of reckless fear mongering.

The refusal of Speaker Nancy Pelosi, Democrat of California, to schedule a vote on a surveillance measure approved Tuesday by the Senate touched off an intense partisan conflict over the national security questions that have colored federal elections since 2002 and are likely to play a significant role again in November.

Trying to put pressure on Democrats, Mr. Bush offered to delay a trip to Africa to resolve the dispute and warned that failure to extend the expanded power under the Foreign Intelligence Surveillance Act, which expires Saturday, could hamper efforts to track terrorists.

“Our intelligence professionals are working day and night to keep us safe,” Mr. Bush said, “and they’re waiting to see whether Congress will give them the tools they need to succeed or tie their hands by failing to act.”

But Ms. Pelosi and other House Democrats said Mr. Bush and Congressional Republicans were at fault because they had resisted temporarily extending the bill to allow disagreements to be worked out. Democrats would not be bullied into approving a measure they considered flawed, she said.

“The president knows full well that he has all the authority he needs to protect the American people,” said Ms. Pelosi, who then referred to President Franklin D. Roosevelt’s admonition about fearing only fear itself. “President Bush tells the American people that he has nothing to offer but fear, and I’m afraid that his fear-mongering of this bill is not constructive.”

The decision by the House Democratic leadership to let the law lapse is the greatest challenge to Mr. Bush on a major national security issue since the Democrats took control of Congress last year.

Last summer, Democrats allowed the surveillance law to be put in place for six months although many of them opposed it. They have also relented in fights over spending on the Iraq war under White House pressure. But with Mr. Bush rated low in public opinion polls as he enters the last months of his presidency, Democrats are showing more willingness to challenge him.

Republicans say House Democrats are taking a risk, especially in light of the strong bipartisan Senate vote for the bill.

“They can’t pass a Mother’s Day resolution and got 68 votes for this bill,” said Representative Adam H. Putnam of Florida, chairman of the House Republican Conference.

The battle over the surveillance bill was also tangled up in the rancor over a House vote to hold in contempt Joshua B. Bolten, the White House chief of staff, and Harriet E. Miers, the former White House counsel, for refusing to testify about the firing of United States attorneys. Republicans said the House was devoting time to that issue when it could be considering the surveillance program, and they staged a walkout in protest.

The main sticking point is a provision in the Senate bill that provides legal immunity for telecommunications companies that, at the Bush administration’s request, cooperated in providing private data after the Sept. 11, 2001, attacks. Many House Democrats oppose that immunity.

Surveillance efforts will not cease when the law lapses. Administration intelligence officials said agencies would be able to continue eavesdropping on targets that have already been approved for a year after the initial authorization. But they said any new targets would have to go through the more burdensome standards in place before last August, which would require that they establish probable cause that an international target is connected to a terrorist group.

Intelligence officials also told reporters Thursday that they were worried that telecommunications companies would be less willing to cooperate in future wiretapping unless they were given immunity.

Ben Powell, general counsel for the director of national intelligence’s office, said some carriers had already asked whether they could be compelled to cooperate even without legal protection, although he indicated that none had actually threatened to halt operations.

Ms. Pelosi said that she believed that the differences could be resolved within three weeks and that she had told the chairmen of the House Intelligence and Judiciary Committees to work with their counterparts in the Senate to seek a compromise.

Congressional Republicans sharply criticized Democrats for not moving on the final measure.

“I think there is probably joy throughout the terrorist cells throughout the world that the United States Congress did not do its duty today,” said Representative Ted Poe, Republican of Texas.

Democrats said Republicans, struggling politically, were trying to create an air of crisis.

“This is a manufactured political crisis,” said Senator Richard J. Durbin of Illinois, the No. 2 Democrat. “They want something to put in front of the American people to take their minds off the state of the economy.”

Eric Lichtblau contributed reporting.

    House Leaves Surveillance Law to Expire, NYT, 15.2.2008, http://www.nytimes.com/2008/02/15/washington/15fisa.html?hp

House Approves Economic Stimulus Plan

January 30, 2008
The New York Times
By DAVID M. HERSZENHORN

WASHINGTON — The House voted on Tuesday to approve a $146 billion fiscal stimulus package, hoping to seal a fast-paced deal with President Bush on tax rebates and business incentives intended to jolt the economy with new spending.

But the deal, which would be the most striking show of bipartisan cooperation since Democrats won control of Congress in 2006, was at risk as Senate Democrats forged ahead with their own, more expensive plan and jockeyed over what to include in it.

The House plan was approved by an overwhelming vote of 385 to 35. Speaker Nancy Pelosi and the Republican leader, Representative John A. Boehner of Ohio, immediately called on the Senate to adopt the House bill without changes, as did President Bush when he was signing an executive order at the White House.

“The temptation is going to be for the Senate to load it up,” Mr. Bush said. “My concern is that we need to get this bill out of the Senate and on my desk so the checks can get in the hands of our consumers, and our businesses can be assured of the incentives necessary to make investments.”

But there was little indication that the Senate would simply bow to the lower chamber.

Instead, Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, advanced a $163 billion stimulus package that he said was better, despite warnings from House leaders and the White House that he could derail the agreement or plunge the nation too far in debt, so the money to pay for the stimulus would have to be borrowed.

And while the one-year difference in cost of the two plans would seem to be $17 billion, House officials criticized the Senate for trying to blur the full price tag by pushing some expenses into 2009. That would make the two-year cost of the Senate package almost $196 billion compared to almost $161 billion for the House version.

Both plans focus on personal tax rebates and incentives for businesses intended to spur spending. The Senate plan also extends unemployment benefits for 13 weeks beyond the 26 weeks currently provided in most states — at a cost of $10 billion in 2008.

And it drops a component of the House package that would raise the limit on so-called “conforming” mortgages that can be insured by the Federal Housing Administration or bought by Fannie Mae and Freddie Mac, the government-sponsored finance companies — a step that would help homeowners in expensive markets refinance their loans.

The majority leader, Senator Harry Reid of Nevada, said the bill would be on the floor by late Wednesday and was likely to be approved this week. And he said he remained confident that there would be a good deal, despite the continued jockeying by senators, who he said had made at least 15 competing requests to add components to the plan by amending the bill.

Among the potential amendments were ones to give more money to food banks, to increase food stamps temporarily, to increase subsidies for home heating and other energy costs for low-income families, to adopt alternative energy tax credits and to finance infrastructure projects.

In a sign of how Senate Democrats were still wrangling over exactly how to structure the package, Mr. Reid said he strongly opposed a Baucus proposal to give tax rebates even to the wealthiest filers, unlike the House plan, which set caps on eligibility.

“To take out the caps,” Mr. Reid said, “it’s causing me to want to gag, O.K.?”

Mr. Reid pointed out that, without the caps, even members of Congress would get the rebates, which Democrats have said they want directed to middle-class Americans.

“I think it would send the wrong message to spend an extra $5 billion to give me a rebate,” Mr. Reid said. “I’m not going to spend the money. I think it’s wrong. I think Warren Buffett should not have the rebate, and I’m totally opposed to it.”

The White House and House leaders had said that one of the advantages of their stimulus plan was its simplicity.

It calls for tax rebates of up to $600 for individuals and $1,200 for couples, with the payments phased out for individuals earning more than $75,000 and couples earning more than $150,000.

It would provide a minimum payment of $300 for individuals paying less than that in income taxes who show earned income of at least $3,000. And it would provide an additional payment of $300 a child for all families receiving a payment.

On the business side, the House plan would give companies a 50 percent bonus deduction on new equipment that would normally be depreciated over many years. And it would double the limit on expenses to $250,000 from $125,000 that small businesses can deduct from annual income, with a total cap of $800,000.

Mr. Baucus said that he, too, wanted a simple stimulus plan. “I do not want to load it up with lots of other provisions,” he said.

He denied suggestions that he was complicating things by proposing a rival plan that would have to be reconciled with the measure adopted by the House.

“Oh, no, no,” Mr. Baucus said when asked if he was complicating the package. “Someone could say the sky is purple, too. That’s not accurate. What we’re doing is we’re making it work better.”

He said the Senate rebate plan was more straightforward, providing payments of $500 for individuals, $1,000 for couples filing jointly and an additional $300 a child, with no income cap.

The Senate plan would also send $500 checks to some 20 million Americans over the age of 62 who live only on Social Security benefits and would not have qualified for payments under the House proposal.

The Senate also structures its business tax breaks differently and would give businesses the added ability to deduct losses from up to five years ago. Current law allows businesses to deduct losses from only two years ago.

Ms. Pelosi had initially sought an extension of jobless benefits and an increase in food stamps, but dropped those demands in favor of an agreement to provide $28 billion in one-time payments to more than 35 million families that would not otherwise have qualified for income-tax rebates.

But on Tuesday, Ms. Pelosi said that her own support for some of the proposals being floated in the Senate was secondary to the urgent need to secure a short-term stimulus plan, without vastly increasing the national debt.

“I don’t want anything that’s done in the Senate, as much as I would support many of those initiatives, to do any harm to what we have done in our rebate package,” Ms. Pelosi said. “It doesn’t mean that all of those initiatives are not worthy, and in fact, I advocated for them myself. But instead we got a package that we could agree upon and move quickly with.”

Senator Mitch McConnell of Kentucky, the Republican leader, said he, too, supported swift adoption of the House plan.

“I hope that will be possible,” Mr. McConnell said. “This is not a time to get into some kind of testing of wills between the two Congressional bodies. This is a time to show that we can rise above partisanship, do something important and do it quickly.”

Carl Hulse contributed reporting.

    House Approves Economic Stimulus Plan, NYT, 30.1.2008, http://www.nytimes.com/2008/01/30/us/30fiscal.html?hp

Legislation on Economy

Will Start in House

January 23, 2008
The New York Times
By CARL HULSE

WASHINGTON — Congressional leaders agreed Tuesday that the House would take the lead on legislation intended to stabilize the economy, giving the speaker, Nancy Pelosi, and Representative John A. Boehner, the Republican leader, primary responsibility for reaching an agreement with the White House.

Senate leaders said it made more sense strategically for the House to act first so that Congress could produce an economic package by mid-February.

“We legislatively have a little more difficult time doing things,” said Senator Harry Reid of Nevada, the majority leader, after Congressional leaders met with President Bush at the White House. “We think it would send a tremendous message to the American people that we have something bipartisan that comes to us from the House. We’ll do everything we can in the Senate to move it as quickly as possible.”

The effort will test a new spirit of cooperation that Ms. Pelosi, a California Democrat, and Mr. Boehner, an Ohio Republican, have demonstrated in the opening days of the 2008 Congressional session after a year of partisan friction. But both sides appeared optimistic they could strike a deal.

“I think there’s an agreement on a bipartisan basis that if Congress can act now, we may be able to avert a serious economic downturn, and that’s our goal,” Mr. Boehner said.

But some Republicans have already raised concerns. Senator Judd Gregg of New Hampshire, chairman of the Budget Committee, warned of potential long-term costs from a hasty response to economic turmoil. Other Republicans worried privately that the administration could be in such a hurry to get a bill that the White House could agree to too much spending.

“If we’re going to stimulate the economy through fiscal policy, let’s do it correctly, not in a way that damages the economy for the future or basically gets you a short-term political headline but doesn’t get you the impact you need,” Mr. Gregg said.

Though producing a bill by Feb. 15 would be a virtual sprint for Congress, senior lawmakers who have been in regular talks with the administration said Congress had no choice but to move quickly given the market turmoil.

“It underlines the basic fundamental problem,” said Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee. “I think it will help encourage Congress to focus on a stimulus package that passes quickly and does not get too loaded down with peripheral stuff.”

Senior House aides said no final decision had been made on whether the economic legislation would be subjected to hearings and debated at the committee level, though one said the developing timeline made that unlikely. The alternative, the official said, would be to get the chairmen of the relevant committees to contribute and then sign off on the package.

Few details of the stimulus plan have been settled, according to both lawmakers and senior staff members. Lawmakers say one sticking point will be a Democratic effort to ensure that Americans who do not earn enough to pay income taxes will be eligible for any rebate from the Treasury.

“Ms. Pelosi and I expect we’ll have a vigorous argument over that issue,” Mr. Boehner said.

Democrats, and some Republicans, say lower-income Americans are among those who most need the rebate and would be most likely to pour their money right back into the economy, providing the stimulus sought by the legislation.

Senator Pete V. Domenici, Republican of New Mexico and former chairman of the Budget Committee, said he could support rebates for those who do not pay income taxes. He urged Congress to consider spending more than the $145 billion recommended last week by the president.

“A larger package would allow us to reach more people,” he said in a statement. “I do not believe $300 billion is overreaching.”

Legislation on Economy Will Start in House, NYT, 23.1.2008, http://www.nytimes.com/2008/01/23/business/23cong.html