By SHERYL GAY STOLBERG and DAVID M. HERSZENHORN
WASHINGTON — President Bush appealed to the nation Wednesday night to support a $700 billion plan to avert a widespread financial meltdown, and signaled that he is willing to accept tougher controls over how the money is spent.
As Democrats and the administration negotiated details of the package late into the night, the presidential candidates of both major parties planned to meet Mr. Bush at the White House on Thursday, along with leaders of Congress. The president said he hoped the session would “speed our discussions toward a bipartisan bill.”
Mr. Bush used a prime-time address to warn Americans that “a long and painful recession” could occur if Congress does not act quickly.
“Our entire economy is in danger,” he said.
On Capitol Hill, Democrats said that progress toward a deal had come after the White House had offered two major concessions: a plan to limit pay of executives whose firms seek government assistance, and a provision that would give taxpayers an equity stake in some of the firms so that the government can profit if the companies prosper in the future. Details of those provisions, and many others, were still under discussion.
Mr. Bush’s televised address, and his extraordinary offer to bring together Senator Barack Obama, the Democratic presidential nominee, and Senator John McCain, the Republican, just weeks before the election underscored a growing sense of urgency on the part of the administration that Congress must act to avert an economic collapse.
It was the first time in Mr. Bush’s presidency that he delivered a prime-time speech devoted exclusively to the economy. It came at a time when deep public unease about shaky financial markets and the demise of Wall Street icons such as Lehman Brothers has been coupled with skepticism and anger directed at a government bailout that could become the most expensive in American history.
The administration’s plan seeks to restore liquidity to the market and restore the economy by buying up distressed securities, many of them tied to mortgages, from struggling financial firms.
The address capped a fast-moving and chaotic day, in Washington, on the presidential campaign trail and on Wall Street.
On Capitol Hill, delicate negotiations between Treasury Secretary Henry M. Paulson Jr. and Congressional leaders were complicated by resistance from rank-and-file lawmakers, who were fielding torrents of complaints from constituents furious that their tax money was going to be spent to clean up a mess created by high-paid financial executives.
On Wall Street, financial markets continued to struggle. The cost of borrowing for banks, businesses and consumers shot up and investors rushed to safe havens like Treasury bills — a reminder that credit markets, which had recovered somewhat after Mr. Paulson announced the broad outlines of the bailout plan last week, remain under severe stress, with many investors still skittish.
Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, said a deal could come together as early as Thursday. “Working in a bipartisan manner, we have made progress,” the House speaker, Nancy Pelosi, and Representative John A. Boehner, the Republican leader, said in a joint statement.
“We agree that key changes should be made to the administration’s proposal. It must include basic good-government principles, including rigorous and independent oversight, strong executive compensation standards and protections for taxpayers.”
Mr. Bush used his speech to signal that he was willing to address lawmakers’ concerns, including fears that tax dollars will be used to pay Wall Street executives and that the plan would put too much authority in the hands of the Treasury secretary without sufficient oversight.
“Any rescue plan should also be designed to ensure that taxpayers are protected,” Mr. Bush said. “It should welcome the participation of financial institutions, large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan’s implementation. And it should be enacted as soon as possible.”
The speech came after the White House, under pressure from Republican lawmakers, opened an aggressive effort to portray the financial rescue package as crucial not just to stabilize Wall Street but to protect the livelihoods of all Americans.
But the White House gave careful thought to the timing; aides to Mr. Bush said they did not want to appear to have the president forcing a solution on Congress.
On Capitol Hill, Mr. Paulson, facing a second day of questioning by lawmakers, this time before the House Financial Services Committee, tried to focus as much on Main Street as Wall Street.
“This entire proposal is about benefiting the American people because today’s fragile financial system puts their economic well being at risk,” Mr. Paulson said. Without action, he added: “Americans’ personal savings and the ability of consumers and business to finance spending, investment and job creation are threatened.”
But it was the comments of Mr. Paulson, a former chief of Goldman Sachs, about limiting the pay of executives that signaled the biggest shift in the White House position and the urgency that the administration has placed in winning Congressional approval as quickly as possible.
“The American people are angry about executive compensation, and rightly so,” he said. “No one understands pay for failure.”
Officials said the legislation would almost certainly include a ban on so-called golden parachutes, the generous severance packages that many executives receive on their way out the door, for firms that seek government help. The measure also is likely to include a mechanism for firms to recover any bonus or incentive pay based on corporate earnings or other results that later turn out to have been overstated.
Democrats were also working to include tax provisions that would cap the amount of an executive’s salary that a company could deduct to $400,000 — the amount earned by the president.
At the same time, Congressional Democrats said they were prepared to drop one of their most contentious demands: new authority for bankruptcy judges to modify the terms of first mortgages. That provision was heavily opposed by Senate Republicans.
In addition, Democrats also are leaning toward authorizing the entire $700 billion that Mr. Paulson is seeking but disbursing a smaller amount, perhaps only $150 billion, to start the program, with future funds dependent on how well it is working.
Representative Barney Frank of Massachusetts, the lead negotiator for Congressional Democrats, said they also planned to insert a tax break to aid community banks that have suffered steep losses on preferred stock that they own in the mortgage finance giants Fannie Mae and Freddie Mac.
That change is in addition to others that already have been accepted by Mr. Paulson that would create an independent oversight board and require the government to do more to prevent foreclosures.
IN CLASS DISSCUSSION:
-Should Obama and McCain cancel the scheduled debate?
-Why might/might not the candidates meet with President Bush?
-Should executives at companies have salaries lowered after they are bailed out by the government?
-Alex D- It doesn’t make sense to bail out failing companies, wouldn’t they just make less money?
-(Class consensus) If we let companies go bankrupt, economy will crash, jobs will be lost, wages down, more debt.
-Is putting taxpayer money into buyout a temporary fix up or a solution? –Mr. Brown
-Stricter laws on businesses, make us seem communist, because government controls business. –John Ray
-McCain may be trying to block debate because Obama has advantage on National television, also to show he cares about the economy. If Obama doesn’t want to cancel, he can be accused of not caring enough about the economy. –Matt F.
-There’s a lot of days from now till the election, things will change. - Alex D.
-McCain IS ready for the foreign policy debate, he said he was. –Apeksha
-I believe that it’s all a part of the political campaign, when McCain cancels the debate. –Rajvir
-McCain does care and he is showing that. –Sanaa
-Can Congress change recess? –Alex
-A debate is only one day, Great Depression wasn’t fixed in one day. We need to know the plans of the economy from the candidates NOW. –John Ray
-Obama should us this economic recession to show what he can do about the economy.- Amir! (yes he spoke)
-Karamvir- McCain is trying to put Obama in a bad situation where he has to react.
-Weeks ago, the republicans and McCain were telling us that there was nothing wrong with the economy, now look at what happened. It’s all a part of his Maverick reputation where he stands pat on issues and comes across as courageous yet stubborn. –Matt F.
-Debate only takes a few hours, why can’t McCain take the time to just do the debate then get back to Congress to work on the bill? –Hemant
-The Republicans should have done something about the economy already. –John Ray