Congress haggles over Treasury bailout plan

By Kevin Drawbaugh and Richard Cowan

WASHINGTON (Reuters) - The Bush administration and Congress haggled over the details of a $700 billion Wall Street bailout plan on Monday as U.S. stocks tumbled on worries that even a massive government effort to mop up bad debt may not be enough to revive the economy.

Congressional Democrats want to add assistance for homeowners, curb executive pay at companies who participate in the plan, have the government take equity stakes in those companies and increase oversight of the asset buybacks.

Meanwhile, some Republicans and Democrats hardened their stance against the bailout, and there was talk of work on the package extending into next week.

U.S. Senate Majority Leader Harry Reid said congressional Democrats accepted the need to legislate quickly to stabilize the markets and tackle the housing crisis.

But the Nevada Democrat called Treasury Secretary Henry Paulson's plan, unveiled on Saturday, "a starting point."

"The Bush Administration has called on Congress to rubber stamp its bailout legislation without serious debate or efforts to improve it. That will not happen," said Reid.

House Speaker Nancy Pelosi said bipartisan talks were aimed at giving confidence to the markets that legislation would pass soon. But "we are not sending a blank check to Wall Street," said the California Democrat.

Treasury issued its plan on Saturday to calm markets and attack the worst economic crisis since the Great Depression by buying up mortgage-backed bonds and related securities that are clogging the inner workings of global capital markets.

In an unprecedented proposal to shift hundreds of billions of dollars of bad debt into a government portfolio using taxpayer money, Treasury asked for broad powers to buy up securities over two years and get credit markets moving again.

Paulson and Federal Reserve Board Chairman Ben Bernanke will be among federal officials scheduled to testify on Tuesday before the Senate Banking Committee on the financial turmoil.

ADDING DETAIL

Massachusetts Democratic Rep. Barney Frank told reporters that the administration has accepted some conditions laid down by Democrats, including giving the government a stake in any institution unloading assets under the plan. But sources close to the Treasury said it was opposed to equity stakes and Frank later said: "Apparently I was premature."

Frank said the administration also agreed that the plan should include more efforts to prevent home foreclosures and that an oversight board should monitor the bailout.

Asked if hedge funds would be able to sell assets under the plan, Frank said: "I don't think so."

White House spokesman Tony Fratto said the administration expected there to be strong oversight of the plan, but added that the markets were dealing with "very serious challenges" and quick action was critical.