What's the deal on bailout?

Wall Street Journal:

Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.

Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi (D., Calif.), and Senate Majority Leader Harry Reid (D.), were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after hours of exhausting negotiations.

"I think we're there," an exhausted Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank (D., Mass.) and Senate Banking Committee head Christopher Dodd (D., Conn.).

Those present said the bailout plan still needs to be drafted in its final form, a process staff members were expected to continue throughout the night in what one aide called a "marathon drafting session" in Ms. Pelosi's office just off the rotunda in the Capitol building. A formal announcement is scheduled for some time Sunday, though an exact time and location were not immediately available.

A summary of the tentative agreement released by Ms. Pelosi's office said the plan "gives taxpayers an ownership stake and profit-making opportunities with participating companies; puts taxpayers first in line to recover assets if a participating company fails; (and) guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit."

Additionally, the summary said the legislation will expand the range of firms that can sell troubled assets to the government to include pension plans, local governments and community banks serving "low- and middle-income families."

A House Democratic aide said the government would be able to receive warrants it could hold until maturity from financial firms on assets received either through auctions or through direct purchases.

The summary also said the legislation would institute new executive-compensation requirements for participating companies, including "no multi million dollar golden parachutes," limits on compensation generally, and the ability to recover "bonuses paid based on promised gains that later turn out to be false or inaccurate."

President George W. Bush spoke with Ms. Pelosi earlier in the evening about the discussions, and the White House welcomed news of the deal. "We're very pleased with the progress tonight and appreciate the extraordinary bipartisan efforts being made to stabilize our financial markets and protect our economy," White House spokesman Tony Fratto said.

The next step will involve selling the deal to rank-and-file lawmakers, who have been unhappy over signing on to a giant bailout package just weeks before the November elections. House Minority Whip Roy Blunt (R., Mo.) said that he planned to talk to colleagues and get reactions.

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Blunt's statement does not sound like an embrace of the deal. a majority of voters still oppose it.

Dick Morris says that McCain missed an opportunity by not opposing the deal.

During Friday's debate, John McCain assiduously and inexplicably avoided using the issue that might have won him the debate and the presidency: opposition to a taxpayer-funded bailout of the financial crisis.

Congress is about to pass - and the president is about to sign - a bill that the American people detest by 2:1 margins. When Americans realize that there is, indeed, an alternative to handing over $700 billion to financial institutions as a reward for their failure, opposition to the idea will swell even further.

The bailout ideas proposed by the House Republicans and trumpeted by former Speaker Newt Gingrich make eminent sense. Indeed, they make so much sense that it is as if the roles of the parties have been reversed. It is the Republicans who are demanding that the banks and financial institutions pay for their own bailout, granting them only a mixture of loans and premium-paid insurance, while the Democrats want to pass the hat among the taxpayers to buy their dirty paper.

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It will be interesting to see how much of the House Republican's plan worked its way into the deal. Dick Morris is a master political tactician. But John McCain has always marched to the beat of his own drums. I do not see him obstructing this deal. At best he may get credit for giving the House Republicans room and time to improve it. that might give him some advantage compared to Obama's above the fray attitude.

The NY Times has a story describing McCain's balancing act with the House Republicans. I think it makes him sound pretty wise in retrospect.

CNN reports the "program would be overseen by a board including the treasury secretary, secretary of commerce, head of the Securities and Exchange Commission and chairman of the Federal Reserve." That spreads responsibility from just the treasury secretary as originally envisioned. CNN makes it clear that the House Republicans have not signed off on this deal. It seems to put the deal in the same place it was before it blew up last Thursday, but we may not know until Monday morning.

Mark Tapscott has a very useful side by side comparison chart which indicates the deal has been considerably improved from the one that Franks and Dodd were pushing on Thursday.