WASHINGTON (Reuters) - Many members of the Senate blasted the Bush administration’s Wall Street bailout plan on Tuesday, but no senator has come forward so far with an explicit pledge to kill the $700 billion proposal.
The rules of the Senate, unlike the House of Representatives, give individual lawmakers substantial power to delay or halt legislation, but three Senate aides said there were no clear signs yet of that power being exercised.
As the Senate Banking Committee held a hearing on the plan put forward by the Treasury Department, aides said much would depend on Alabama Sen. Richard Shelby, the committee’s top Republican, who was sharply critical at the hearing.
The outlook for Treasury’s plan would dim greatly if Shelby were to move to block the bill that is expected to emerge soon from congressional debate over the plan, the aides said.
The Democrat-controlled Congress and the Republican Bush administration are in negotiations over specifics of the bailout bill, with the House aiming to get legislation to a floor vote possibly on Friday.
Vice President Dick Cheney was spending much of Tuesday on Capitol Hill trying to address the concerns of his fellow Republicans in the House and Senate.
A senior Republican aide said House Minority Leader John Boehner told his rank-and-file party colleagues that the “economy hangs in the balance” and that a bill is needed.
Boehner also has expressed opposition to some provisions that Democrats want to add to the administration’s request for sweeping authority to buy troubled assets off the books of financial companies.
Meanwhile, House Majority Leader Steny Hoyer pressured the White House to take more responsibility for the bailout in this election year, saying President George W. Bush should make a nationally-televised address to explain “why we’re here, why it’s necessary to take the action that they (the administration) have requested.”
Other senators, including Republicans Jim Bunning of Kentucky and Jim DeMint of South Carolina, have expressed strong concerns. But the aides said these lawmakers also have stopped short of warning they would work to block the bill.
In a hearing room swarming with financial industry lobbyists and sign-carrying protesters, Sen. Mike Enzi said the plan presents “enormous cost and enormous risk ... if approved in its current form, this plan will cost every man, woman, and child in this country approximately $2,300.”
But Enzi, a Wyoming Republican, added, “Unfortunately, the only plan more costly would be doing nothing at all.”
Treasury Secretary Henry Paulson offered a plan on Saturday to authorize the government to use taxpayer funds to buy up billions of dollars in bad mortgage-backed securities that were created by investment banks during the home price bubble.
Now that the bubble has popped, many U.S. homeowners saddled with mortgages they cannot afford are defaulting. As a result, securitized debt instruments that depended on those homeowners being able to repay their loans are now broken.
Banks and other institutions have recorded massive losses from their bad bets on these instruments, many of which are so complex that the banks themselves and the capital markets are unable to estimate accurately the potential for more losses.
Fear and confusion has spread through world capital markets, making banks unwilling to make new loans and threatening the stability of a global financial system that relies heavily on unprecedented amounts of leverage.
Paulson’s plan would shift the broken securities into a huge government portfolio, which he says would allow capital markets to resume working.
At the hearing, Shelby complained that the Treasury’s plan has little for those outside of the financial industry. He said it aims to rescue the same institutions that created the crisis with “sloppy underwriting and reckless disregard for the risks they were creating, taking, or passing on to others.”
Shelby said Wall Street bet the government would rescue them if they got into trouble. “It appears that bet may be the one that pays off,” he said.
“What troubles me most is that we have been given no credible assurances that this plan will work. We could very well spend $700 billion and not resolve the crisis.”
Additional reporting by Patrick Rucker; Editing by Tim Dobbyn