Bush: ‘Our entire economy is in danger’

Earlier Wednesday, Paulson agreed to demands from critics in both parties to limit the pay packages of Wall Street executives whose companies would benefit from the proposed bailout.

“The American people are angry about executive compensation and rightfully so,” Paulson told the House Financial Services Committee. “We must find a way to address this in the legislation without undermining the effectiveness of the program.”

The issue has been a much-debated point in the struggle to win congressional approval of the historic rescue of the financial industry, though the “golden parachute” money involved would be relatively insignificant compared with the huge sums being talked about.

At the same time, Democrats were asking the Bush administration to dramatically cut the size of the rescue and then come back to Congress later if they need more.

Under that plan, which was still emerging, Congress would approve a fraction of what Bush is asking for — perhaps $150 billion or $200 billion — to allow the government to begin rescuing tottering financial companies.

Pelosi has privately suggested the idea to Paulson, according to officials who spoke on condition of anonymity because the negotiations are private.

Sen. Chuck Schumer, D-N.Y., pressed Paulson on the idea Tuesday and was told it would be a “grave mistake.”

But some Republicans said they support it as well. “It’s highly appropriate for them to come back to us once they see and we see how this is working,” said Sen. Bob Corker, R-Tenn.

Rep. Barney Frank, D-Mass., said Wednesday, “Ultimately $700 billion has to be available but ... they are making progress about how to give people some assurance that it is not going to go to $700 billion in one fell swoop.”

Frank, who as chairman of the Financial Services Committee has taken a lead in the negotiations, said Paulson also “accepts the fact” that the bill will give the government an ownership stake in the companies whose bad debts are taken over, a Democratic goal.

The heart of the unprecedented plan, dramatically unveiled less than a week ago, involves the government buying up sour assets of tottering financial firms to keep them from going under and to stave off a potentially severe recession and the accompanying lost jobs and further home foreclosures.

Congressional Democrats dismissed McCain’s dramatic announcement as a political ploy and said his involvement in the talks six weeks before the elections would only muddle the extraordinarily sensitive debate.

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“With all due respect to my friend John McCain, we’re doing just fine. We should not have presidential politics enter what we’re doing here,” said Sen. Harry Reid, D-Nev., the majority leader. He added that McCain “is trying to divert attention from his failing campaign.”

Lawmakers in both parties have strenuously objected to the plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on help for beleaguered homeowners.

Many Republicans and Democrats appear to be more open to legislation, although on different terms than the White House has proposed.

Polls in the last several days have provided mixed messages about the public’s view.

An ABC News-Washington Post poll said Wednesday the public is split about evenly over whether it supports federal “steps” to handle the financial crisis. In a survey released Tuesday by the nonpartisan Pew Research Center, there was nearly two-to-one support for the government “potentially investing” billions to try securing the markets.

Democrats insist Republican lawmakers must stand up for their own president’s proposal, but they appear anything but eager to do so.

“It’s a tough sell to most of our members,” said Rep. Tom Davis, R-Va., after a closed-door meeting with Paulson and Bernanke. “It’s a terrible plan, but I haven’t heard anything better.”

Compounding the administration’s challenge, Republicans and Democrats both say Bush has lost credibility, particularly in cases where he argues there will be dire consequences if Congress doesn’t act.

“They sold the war, they sold the stimulus package and some other things. It’s the ’wolf at the door”’ argument, Davis said.

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