(Adds Pelosi in paragraph 7, further Frank comment on executive pay in paragraph 11)
By Kevin Drawbaugh and Richard Cowan
WASHINGTON, Sept 22 (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.
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.
Democrats have proposed regular disclosure of asset purchases and sales under the plan, along with oversight boards that have congressional representation.
Disagreement remains over Democrats’ efforts to supplement the plan with limits on the pay of corporate executives of asset-selling institutions, said Frank, the chairman of the House Financial Services Committee.
Frank said congressional consideration of the rescue plan could extend into next week. Congress had been scheduled to adjourn on Friday until after the Nov. 4 elections.
Signaling possible trouble ahead in the Senate, where even one lawmaker can delay legislation, Alabama Sen. Richard Shelby said debate is needed on the “hastily crafted” plan.
“Congress must immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion,” said Shelby, the top Republican on the Senate Banking Committee.
South Carolina Republican Sen. Jim DeMint called the Bush bailout plan “completely unacceptable.”
Seeking to keep the Republican ranks from breaking, Senate Republican Leader Mitch McConnell, of Kentucky, said urgent action is needed to stabilize the markets and “contain the problem from spreading to Main Street.”
In the House, California Democratic Rep. Henry Waxman said he has “serious reservations” about the plan. He said it “would enrich the Wall Street executives whose reckless investments caused the financial crisis. The taxpayer is being asked to risk billions to protect the bonuses of investment bankers.”
Monday’s market swoon wiped out nearly all of Friday’s gains, when first word of the bailout plan sparked Wall Street’s best one-day advance since 1987.
The Dow Jones industrial average closed 3.3 percent lower, while the S&P 500 index slid 3.8 percent and the Nasdaq Composite index fell 4.2 percent.
“Here it is Monday and people are waking up from a gigantic hangover, trying to figure out what’s next,” said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas.