Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi, (D., Calif.) and Senate Majority Leader Harry Reid (D. Nev.) 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 days of exhausting negotiations involving members, staff and representatives from the Bush administration.
"I think we're there," an obviously tired 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 Speaker 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 was not immediately available.
A summary of the tentative agreement released by Sen. 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."
The $700 billion would be available in phases. The first $250 billion will be "immediately available" to the Treasury Secretary, and $100 billion available "upon report to Congress," and $350 billion "available only upon Congressional action," according to a summary from the office of House Minority Whip Roy Blunt (R., Mo.), the No. 2 House Republican who was at negotiations.
A summary from Sen. Pelosi's office said the final deal included "cutting in half the administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds."
The Pelosi summary also 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." (See Ms. Pelosi's summary.)
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 Sen. 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. Rep. Blunt said that he planned to talk to colleagues and get reactions.
Lawmakers entered a new round of meetings shortly after 7:30 p.m. EDT, with pizzas headed to one office and a platter of cold cuts from sandwich chain Cosi being delivered into the House Speaker's office. By roughly 11:30 p.m., what Reid described as a "breakthrough" came in the form of an idea from Pelosi that was enough to advance talks.
"She took over at the last minute," a House staffer familiar with the talks said Sunday morning. "The last hour-and-a-half she really brought things together and made it possible to reach this point."
Pelosi also apparently found middle ground on a plan to allow the federal government to recoup money for taxpayers if the asset-purchase program isn't making money after a certain amount of time. A House leadership aide said early Sunday morning that details were not immediately available. But the general concept was to provide Congress with a mechanism that would be triggered perhaps within five years to allow lawmakers to offset some, if not all, of the bailout costs.
Offers and counteroffers were flowing back and forth all night. Among the offers extended by Democrats: an agreement to drop a proposal to devote 20% of potential profits to an affordable housing fund, according to a Senate staffer close to the talks.
A House staffer reached after the deal announcement was made confirmed that lawmakers did decide to drop the affordable housing fund proposals, which would have potentially directed billions to state and local governments to fund housing projects.
One of the biggest sticking points involved concerns that executives at troubled financial institutions would wind up benefiting with handsome pay packages as the government took on more risks. But Democrats emerging from the talks said a whole array of issues related to executive pay had been addressed, including issues involving "golden parachutes," the big pay packages that are sometimes awarded to departing executives.
Sen. Dodd told reporters that protections against golden parachute awards had made it into the final deal, along with an insurance component sought by House Republicans as an option for the Treasury to use if necessary and requirements that Treasury seek to mitigate and reduce foreclosures where possible.
Overall, staff said they expanded Treasury's original 2 1/2 page proposal. The agreement will include significant oversight of the asset purchase program, executive compensation restrictions, the potential for equity stakes in firms that participate in the asset-sale program, and other taxpayer protections.
As for foreclosure prevention measures, Pelosi's office said the legislation would allow the Treasury to work with cash-strapped homeowners whose mortgages are purchased by the federal government to refinance into a more affordable mortgage.
Other foreclosure-prevention measures include an extension of the tax holiday for homeowners who face foreclosure, as well as a tax break for community banks that held shares of Fannie Mae and Freddie Mac. The rescue plan will allow affected banks to take an immediate tax deduction on losses from investments in the two firms, which were taken over by the federal government earlier this month.
It also includes a bipartisan oversight board appointed by members of both parties in Congress, an inspector general to monitor Treasury decisions, and regular audits from the Government Accountability Office. Treasury will also have to post publicly and online transactions made through the troubled asset program. Unlike the original Treasury proposal, which would have given the department legal immunity in the program, the tentative agreement reached Saturday allows for judicial review of Treasury decisions.
Sen. Barack Obama (D. Ill.), the Democratic Party presidential nominee, said the tentative deal appears to embrace key principles he favors: better oversight, the potential for taxpayers to receive profits from the workout, CEO compensation limits and foreclosure protections.
"When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration," Obama said in a statement Sunday. "But this step is necessary."
Republican nominee Sen. John McCain, interviewed by ABC's "This Week," said, "This is something that all of us will swallow hard and go forward with."
In a sign of how sensitive Congress is to market reaction, lawmakers stayed in touch with outside experts during the negotiations, including talking to billionaire investor Warren Buffett.