House Democrats weigh new economic stimulus

WASHINGTON (Reuters) - Democratic leaders in the House of Representatives, seeking to stave off a recession that many fear is near, pushed on Monday for a second economic stimulus package and greater regulation of financial markets.

With presidential and congressional elections just three weeks away, they also said the Treasury Department needs to use the recently approved $700 billion bailout fund to buy shares of troubled banks.

"In many ways, this is the economic challenge of our lifetimes," House Democratic Leader Steny Hoyer of Maryland told a news conference after a meeting of top House Democrats and economic advisers.

Rep. Barney Frank, who chairs the House Financial Services Committee, said he planned to hold hearings soon on the need to oversee credit default swaps and derivatives.

"Failure to regulate the economy appropriately is what led to this mess," said Frank, a Massachusetts Democrat.

President George W. Bush, a Republican, helped lead the charge for the $700 billion rescue plan last month after the meltdown on Wall Street that has hobbled the global financial system. But Bush has resisted Democratic calls for a second round of economic stimulus.

Early this year, before a steep drop in global markets and the teetering of several U.S. banks, Congress passed and Bush signed a $168 billion stimulus package that was credited with helping short-term economic growth.

House Speaker Nancy Pelosi, a California Democrat, said hearings would be held in coming weeks to determine the size and shape of a proposed second package. Democrats have talked of about $150 billion in new stimulus.

HOW BIG IS PACKAGE?

At Monday's news conference, Pelosi would not say how much the second package would be worth, only that it would be bigger than the $61 billion plan passed by the House last month. A $56 billion package stalled in the Senate in the face of Republican opposition.

Pelosi said the new package would include money to rebuild aging roads, bridges and other infrastructure, as well as more help for the long-term unemployed and aid to cash-strapped states facing growing health care costs.

House Republican Leader John Boehner of Ohio, in a letter to Pelosi, agreed that additional measures were needed to help the U.S. economy get back on track.

But he said Democrats were taking "an irresponsible, business-as-usual approach" and outlined items he would prefer, including lower business and capital gains tax rates.

Congressional Democrats, along with their party's presidential nominee, Barack Obama, have blamed the economic turmoil on Bush's fiscal policies of the last eight years, which have included reduced regulations and tax cuts that mostly helped the rich.

Largely because of the economy, recent opinion polls show Obama leading Republican contender John McCain, who Democrats have sought to tie to Bush's policies.

White House spokesman Tony Fratto dismissed Monday's Democratic "economic forum" as political theater before the election on November 4.

"This meeting today is about campaign politics, not helping the economy. We'll see where we are next month when Congress returns" from its election recess, Fratto said.

"Democrats are not taking into account the enormous amounts of both fiscal and monetary stimulus that are just now working their way into the economy."

The meeting with Democratic leaders included former Treasury Secretary Lawrence Summers and Joseph Stiglitz, a White House adviser during Bill Clinton's presidency.

(Editing by John O'Callaghan)