Bailout plan faces first test in House today DIFFICULT VOTE: Many believe they must support the bill in order to avert economic catastrophe

House Republican Whip Roy Blunt (R-MO) (C) speaks to the media along with House Minority leader John Boehner (R-OH) (L), chief deputy whip Eric Cantor (R-VA) (2nd R) and Rep. Adam Putnam (R-FL) after meeting with fellow House Republicans regarding the bailout package for the current financial and banking crisis, on Capitol Hill in Washington September 28, 2008. REUTERS/Chris Kleponis (UNITED STATES) less House Republican Whip Roy Blunt (R-MO) (C) speaks to the media along with House Minority leader John Boehner (R-OH) (L), chief deputy whip Eric Cantor (R-VA) (2nd R) and Rep. Adam Putnam (R-FL) after meeting ... more Photo: Chris Kleponis, Reuters Photo: Chris Kleponis, Reuters Image 1 of / 4 Caption Close Bailout plan faces first test in House today 1 / 4 Back to Gallery

Congress prepared to cast a somber and momentous vote today - a vote of conscience - on a $700 billion bailout of the nation's financial system, hoping that it will prevent what many members now fear is an impending collapse of the U.S. economy.

House Speaker Nancy Pelosi refused late Sunday evening to guarantee it would pass. After intervening twice during marathon Saturday negotiations to force the Bush administration to accept further changes, the San Francisco Democrat said simply, "We did the very best we can to improve it. Now let's see how much support we get."

House Republican leader John Boehner, R-Ohio, after a long meeting explaining the bailout plan to nervous members, said he supports the plan and urged "that as many as can vote for this bill should do it."

The Senate is expected to vote Wednesday. Democrats said they want half of the House Republicans to vote for the bill, to force them to help carry the responsibility for an administration-led bailout. Many members in both parties said Sunday they were still undecided.

President Bush, who is expected to speak this morning to calm the markets, issued a statement thanking Congress for giving his administration "the necessary tools and funding to protect our economy from a systemwide breakdown," saying inaction would be "disastrous."

A sense of foreboding hung over members, none of whom on either side of the aisle is eager to cast such a difficult vote. Those who do will win no praise or adulation, but will have to explain to their angry and fearful constituents why they took action of such unprecedented scope and untold consequence.

But many feel they must vote yes or be responsible for an economic collapse that could wipe out millions of jobs and close thousands of businesses. The hope is that with the government offering to buy distressed debt from banks and other institutions that have no market for that debt today, the credit markets that have ground to a near halt will be unfrozen and normal commerce can resume.

A need to act

"I'm as mad as my constituents are," said Rep. Ellen Tauscher, a Walnut Creek Democrat who was one of the first women to hold a seat on the New York Stock Exchange.

But in the end, she said she would vote for the bill and bring her New Democrat caucus with her. "This is a time when you come to work and it's game day. This is not a drill."

Rep. Christopher Shays, R-Conn., called it a "legacy vote" as he left the GOP meeting still unsure what he would do. "This is the kind of vote you have to live with for the rest of your life."

Los Angeles Democrat Henry Waxman, a fierce opponent of the administration, said he had called many economists and financial experts for advice and was convinced of the need to act. "All of them said to me you cannot leave doing nothing," Waxman said.

Members were presented with a plan devised by an administration that neither Republicans nor Democrats trust any longer. They were told they must act immediately, and had no time to explore alternatives. Pelosi pointedly emphasized that the legislation belongs to the Bush administration, and congressional leaders, Republican and Democrat, did the best they could in the time they had to modify the unparalleled grant of money and unconstrained authority that Treasury Secretary Henry Paulson initially demanded little more than a week ago.

Members said they were not being pressured by leaders or offered favors for their votes, but members who face easy re-election bids will be urged to help push the bill to passage.

Angry dissidents from both parties met across the hall from each other in the basement of the Capitol. "Why are we swallowing the underlying premise of the administration?" asked Rep. Dennis Kucinich, D-Ohio. "Remember what happened in the Iraq debate."

Opposition Democrats, gathered by Rep. Brad Sherman, D-Sherman Oaks (Los Angeles County), queried economists about alternatives. They got cold comfort, told that maybe if nothing is done, people would be unable to withdraw cash from their banks' ATM machines "for a few hours," and that the collapse of the banking system could be remedied by a nationalization of the banks for two or three years, during which time the U.S. financial system would be transformed.

House and Senate leaders from both parties signed off on the bill at 12:30 Sunday morning after hours of tense negotiations.

Pelosi's crucial proposal

Pelosi intervened twice to break deadlocks, forcing the Bush administration to accept taxpayer protection in addition to what the administration had agreed to last week and limits on executive compensation.

One of her proposals turned out to be crucial in winning agreement. It requires that if the government loses money on its purchases after five years, the president must propose a way to force financial institutions to repay the money to taxpayers.

The changes were added mainly to bring on board conservative House Democrats - whose pay-as-you-go philosophy, already in tatters, is eviscerated with this legislation - and House Republicans who had revolted last week and proposed their own alternative plan for insurance self-financed by banks rather than taxpayers.

These are in addition to changes the administration agreed to late last week that require equity participation by taxpayers in companies whose bad debt the taxpayers buy, aid to homeowners facing foreclosure by directing the Treasury to work out distressed loans where possible, and doling out the money in installments of $250 billion, $100 billion and $350 billion. Congress could block the last installment within 30 days of the president's request for the money.

Paulson, a former chief executive of investment bank Goldman Sachs, had argued that limits on executive compensation could reduce participation in the bailout.

The legislation would impose a punitive 20 percent surtax on golden parachutes for executives of companies whose bad debt the Treasury purchases, said Sen. Judd Gregg, the New Hampshire Republican who led Senate Republicans in the negotiations.

Pelosi said that for Wall Street executives, "the party is over."

Gregg insisted that taxpayers would make much if not all their money back when distressed mortgages and related securities that are now weighing down bank balance sheets are later resold, when markets presumably recover.

Pelosi said all transactions under the plan will be posted on the Internet within 48 hours, and strong oversight was added, including three independent agencies: a bipartisan board appointed by Congress, the General Accountability Office, and a new inspector general. The Treasury will also have to consider the Republicans' insurance plan as an option.

Sherman denounced the changes as fig leaves. He predicted that Bush will request the final installment within days, and if Congress objects, he will veto lawmakers' objection, requiring a two-thirds vote of both chambers to stop the financing.

A contentious meeting

The agreement came after an unprecedented and contentious meeting at the White House last week that included both presidential nominees, Democrat Barack Obama and Republican John McCain. McCain, accused by Democrats of interfering, was praised by House Republicans for forcing changes and possibly saving the bill by making sure they were heard. McCain called the legislation vital to the nation, but had threatened Senate Republicans that he might not back it unless House GOP objections were incorporated.

"This is something that all of us will swallow hard and go forward with," McCain said.

Obama issued a statement calling the agreement "the culmination of a sorry period in our history," but called it necessary and promised a thorough review of the plan should he win the presidency.

Gregg said the intervention by both candidates proved helpful in the end by calling public attention to the severity of the crisis. Gregg was dire in his warnings of what would happen without action.

"What we face in the credit markets is a potential financial dislocation of a proportion we've never seen," he said. "This is about Main Street. This is about the whole fabric of American life. ... It would be such a catastrophe for our nation, we don't even want to think about it."