The emergency legislation would give the government broad power to buy up devalued assets from troubled financial firms in a bid to unlock the flow of credit and stabilize badly shaken markets in the United States and around the globe.
In one expansion of its original proposal, the administration is asking for broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
Sen. Chris Dodd, D-Conn., the Banking Committee chairman, has proposed granting that request; Frank said he was working to limit the bailout to mortgage-related investments.
Differences remained with the administration on Democrats’ proposal that the government take an ownership stake in the troubled companies it bails out so that taxpayers could benefit from future profits. Frank said Paulson had accepted the idea in principle, but several staff aides at work on the plan said there was no agreement yet on how the concept would work.
Frank said he and Paulson had agreed to create a congressional oversight board as part of the bailout and to mandate that the government come up with a plan to avoid foreclosures on any mortgages it acquires in the rescue. A government official with knowledge of the talks confirmed the administration backs those provisions.
As for tottering financial firms, there still were divisions on which would be helped and what kind of assets the government could buy as part of the bailout.
And in a fresh sign of a challenging road ahead, Sen. Richard C. Shelby of Alabama, the top Banking Committee Republican, blasted the emerging plan as “neither workable nor comprehensive.”
“In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts,” Shelby said.
Lawmakers on both extremes of the political spectrum assailed the plan as a massive, poorly conceived bailout. Conservative House Republicans and liberal House Democrats both and huddled privately to express their concerns.
A partisan battle was brewing over the bankruptcy provision for homeowners’ mortgage payments, a key Democratic demand.
“We’ll see how hard they fight — it’s something we care about,” Frank said.
Lawmakers in both parties appeared to be coalescing around the idea that executive compensation limits should be part of the bailout, although Paulson is said to be concerned that such curbs would discourage companies from participating.
“Some element of