Convincing Congressional Republicans
In a day of fast-moving developments there are some signs that discussions on a financial rescue package may re-start in a constructive way. According to Sen. Harry Reid (D-NV), House Republicans have agreed to return to the negotiating table at the noon hour under the leadership of House Minority Whip Roy Blunt (R-MO). To the extent the conversation is required to reach a compromise, this is a sign of progress in getting to a deal. Blunt will be bringing with him an outline of the House GOP plan to deal with the financial crisis. The key elements of that plan are the following:
- Federal insurance of mortgage-backed securities (in addition to the insurance already provided to Fannie Mae and Freddie Mac products). Premiums paid by asset owners would support the program.
- Regulatory and tax relief for the financial industry (e.g ability to suspend dividend payments).
- A cut in the capital gains tax.
- Greater transparency in reporting of the types of assets held by financial institutions and greater SEC scrutiny of audit reports.
While the presence of high-level House GOP negotiators may be helpful to the process, many who have been involved in the previous discussions will view the GOP proposal as inadequate to the task at hand. As the partisanship of the discussion has ratcheted-up, the challenge to getting an agreement has increased. Key Democratic leaders are now more likely to insist that the Administration deliver a large number of House GOP votes for this package so the Democrats' risk of political exposure for supporting a deal will be limited. In a statement to reporters late this morning, White House Press Secretary Dana Perino said President Bush is engaged actively in seeking support for the package from House Members. She indicated he is willing to continue to consider modification to the original plan. It remains unknown the extent to which Sen. McCain will engage in the ongoing discussion. Given that he has previously said his debate participation was contingent on progress towards a deal, his plan to debate tonight may be a positive sign. Among the unknowns at this juncture are the role Sen. McCain wants to play and can play in this process and the extent to which President Bush will engage in the effort to bring Republicans on board Both of these players could be key in making this a bi-partisan plan. The timeframe for ultimate consideration of a plan on Capitol Hill is still up in the air. One scenario being discussed is attaching the plan to the continuing appropriation bill, which is needed to keep government running after September 30. This would be viewed as an effort to "jam" the deal through the process by attaching it to a "must pass" bill. If such a process is used, opponents will have additional fuel for their argument that this deal is being pushed too fast.
