Financial Reform Watch

Moving towards Consensus

There has been a seismic shift in Congressional attitude over the past 48 hours. Skepticism over the administration’s plan has evolved into hardened resolve to achieve consensus and pass a financial relief package as soon as possible. People are still reluctant to commit to a timeframe, but the pace has quickened. Whereas two days ago, Senate staff were waiting for their House counterparts to draft a plan, reports now indicate that both sides began working together yesterday to craft a single, unified plan.

Publicly, several lawmakers, including Senate Banking Chairman Chris Dodd (D-CT) and House Financial Services Chairman Barney Frank (D-MA), have said Congress and the administration are very close to striking a deal in the next “day or so.” At 10 a.m. this morning Frank hosted Dodd as well as Sen. Bob Bennett (R-UT), a senior member of the Senate Banking Committee, and Rep. Spencer Bachus (R-AL), the ranking member of the House Financial Services Committee, to continue drafting the plan. We have reports that the drafting session will expand to include others and will continue all day. Congressional leaders are working to have a consensus plan by today’s 4 p.m. meeting at the White House with President Bush and the presidential candidates.

Frank confirmed publicly that they have reached broad agreement on a bill that would include an oversight board, taxpayer profit-sharing, and conditions on how the $700 billion spending authority may be used. He did not remark on whether or not the plan would include incremental funding authority – an idea that has circulated on both sides of the aisle. Limits on executive compensation for government-assisted firms and homeowner assistance programs are expected elements of the plan.

Congressional Democrats are also pushing a provision to allow bankruptcy judges to rewrite mortgages in order to prevent further foreclosures. Democratic leaders privately acknowledge they may not be able to overcome Republican opposition to this.

Despite the lack of available detail, chances are definitely improving for completion of a financial relief package before the markets open on Monday. House Majority Leader Steny Hoyer (MD) said yesterday it is possible for the bailout package to come to the floor in the next 72 hours and held out the possibility of working through Sunday evening and coming back into session Wednesday, following Rosh Hashanah. We anticipate Congress and the White House working throughout the weekend.

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