Bailout shakes Capitol
By Alexander Bolton, The Hill
Posted: 09/22/08 08:12 PM [ET]

....House Financial Services Chairman Frank told reporters that the White House has exaggerated the urgency. “It’s not essential this week,” Frank said.

But later on Monday, Frank said he expected Congress to pass a bailout bill by the end of the week.

One Wall Street analyst blamed Frank for initially spooking investors.

Joseph Brusuelas, chief economist for Merk Investments of California, said the market took fright after learning of Frank’s support for an oversight board that would monitor the Treasury’s purchase of troubled mortgage-backed securities and other financial instruments threatening to exacerbate market turmoil.

Frank’s comments “seemed to trigger the most intense period of the sell-off,” said Brusuelas, who added that he has never seen the markets react in such a way to comments from a Washington committee chairman.

Upon learning that some blamed him for the market decline, Frank said: “I have no idea, in the short term, why the market does what it does, and neither does the market.”

Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking, Housing and Urban Affairs Committee, also threw uncertainty on the prospect of quick congressional action by circulating a list of proposed reforms that he may attach to bailout legislation.

Dodd is considering establishing an oversight board to supervise the Treasury Department’s purchase of sour investments; stronger reporting requirements for Treasury’s bailout program; regular audits of the program by the Government Accountability Office and other reforms.

Dodd is also reviewing a list of proposals to help an estimated 2 million Americans facing foreclosure.

Jim Manley, a spokesman for Senate Majority Leader Harry Reid (D-Nev.), said Dodd is leading Senate negotiations with the White House and may offer his own bill as a substitute for Paulson’s plan....

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Lobbyists seek change to language
By Jim Snyder, The Hill
Posted: 09/22/08 08:03 PM [ET]

...Some Democrats already indicated the package may not pass until next week — news that sent stock prices tumbling and stressed some business lobbyists.

“If we don’t move quickly, we could be in the soup,” said Bruce Josten, the chief lobbyist of the U.S. Chamber of Commerce.

Complicating lobbyists’ efforts was the difficulty of keeping track of all the various counterproposals to the administration’s bill.

One financial services lobbyist said his group was keeping a flow chart to try to keep track of who on Capitol Hill was pushing what.

“It ebbs and flows,” the lobbyist said. “It literally changes by the hour.”

Added Josten: “I think every 10 minutes, something changes here. I think they are wrapped up in it. It’s hard to tell what’s in, what’s out.”

One congressional reaction that emerged — Senate Banking Committee Chairman Chris Dodd’s (D-Conn.) response to the rescue package — wasn’t favorable to many of K Street’s banking clients, who oppose one provision in particular: giving bankruptcy judges the power to lower mortgages for distressed homeowners.

“We are vigorously opposing that,” said Steve Verdier, a lobbyist for the Independent Community Bankers Association (ICBA). “If that happens, then the mortgage rates for other consumers are going to go up.”

ICBA sent out a new “issue alert” to its members on Monday in response to the Dodd proposal, and encouraged members to send a new letter to Capitol Hill even if they already signed a grassroots message on the ICBA website.

“‘Hit ’em harder’ is our message,” Verdier said.

The American Bankers Association joined in the criticism of the so-called “cram-down” provision.

“Authorizing write-downs of mortgages by bankruptcy judges will increase the risks of mortgage lending at a time when the market is already struggling” the ABA said in a letter it sent to Capitol Hill on Monday.

Consumer and labor groups, meanwhile, welcomed additional homeowner protections in Dodd’s bill that were not included in the Treasury Department’s proposal....groups like the NAACP, National Fair Housing Alliance, and the Service Employees International Union wrote lawmakers on Monday.

Under the bankruptcy protection provision in Dodd’s bill, bankruptcy judges could lower the value of the loan to help homeowners meet their payments.

control of securities it will have the power to change the terms of the underlying mortgages. But that shifts the financial costs of reducing the price of the loans to the taxpayer rather than the shareholders in the bank that made the bad loans in the first place.

In addition to the added bankruptcy protection, labor groups pressed Congress to include a second stimulus package as part of the bailout bill....AFL-CIO President John Sweeney told congressional Democrats in a letter.

Bill Samuel, the labor union’s director of government affairs, argues that...

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Washington asks $700B trick question
By Jared Allen, The Hill
Posted: 09/22/08 08:09 PM [ET]

So just how much does a “$700 billion” bailout of Wall Street actually cost, anyway?....

The Congressional Budget Office (CBO), which is responsible for “scoring,” or estimating the impact on the Treasury of every bill that comes out of Congress, hasn’t said. In fact, the CBO is still chewing on the numbers behind the government’s $85 billion bailout of AIG last week, trying to determine how that investment will be applied to the government’s balance sheet.

House Financial Services Committee Chairman Barney Frank (D-Mass.), Treasury Secretary Henry Paulson and a number of economists have said the amount could be far, far less than the $700 billion authorization being called for, especially if the government can hold onto the troubled securities it buys long enough for the stock and housing markets to turn around and substantially increase the value of this “paper.” In fact, the government may even be able to make a profit on the deal in the long run, they say....