The business community is championing a rescue plan that essentially installs regulators inside the private market. Chamber threatens anti-bailout members

When the $700 billion Wall Street rescue plan went up in smoke on Monday, House Republicans who opposed it immediately got a threatening e-mail — from the U.S. Chamber of Commerce.

“KEY VOTE ALERT!” the headline read in GREAT BIG PRINT.


“Make no mistake: When the aftermath of congressional inaction becomes clear, Americans will not tolerate those who stood by and let the calamity happen,” it continued.

“The Chamber will score votes on, or in relation to, this issue in our annual How They Voted scorecard,” read its closing, underlined and bold-printed final sentence.

The implicit threat: A bad rating on that scorecard could mean a loss of campaign cash, direct mail and any other help the deep-pocketed Chamber can deliver to lawmakers in tight races.

To be fair, the alert was delivered to all lawmakers. But it carried its biggest sting in the Republican caucus, which has long relied on the Chamber for political support.

The tension between the two allies illustrates how deeply the financial crisis has upended Washington.

The business community has spent years and millions blocking greater government oversight. Now it’s championing a rescue plan that essentially installs regulators inside the private market.

The $700 billion plan aimed at thawing a crippling credit freeze includes a provision creating a new congressional board and a new inspector general to watch over Treasury and, by extension, any company that does business with it.

It charges the Government Accountability Office with conducting vigorous audits of the transactions between the new government real estate and securities experts and the private sector.

And it invites virtually any business or economic expert, real or self-declared, to weigh in on any of the deals because they will be posted on the Internet within two days of their being proposed.

And the business community thought the Securities and Exchange Commission was so bad?

“We will have to come back and redesign how we regulate our financial industry. We hope to do that in a calm and considered way with a new Congress and a new administration,” said John Castellani, head of the Business Roundtable.

“But we’ve got to get to next year, and that is why we are willing to accept more regulations,” he added.

David Abromowitz, senior fellow for the more liberal Center for American Progress, says businesses and their allies haven’t completely lost their free-market bent.

“The mechanism Treasury first proposed was about as lightly regulated as possible. It was a three-page bill giving the Treasury secretary $700 billion in borrowing power to buy anything he thought would help alleviate the mortgage crisis with no review,” said Abromowitz.

In addition, the White House’s main fixation has been relieving the credit crunch plaguing capital markets, rather than solving or easing the underlying problem: home foreclosures.

Still, the corporate world is being forced to bend. Beyond the expanded oversight provisions, the legislation being touted by business leaders even puts a cap on CEO salaries.

“None of this, in a stand-alone bill, in calmer times would be, in our view, necessary,” Castellani said. “It is necessary now, and it’s necessary to get our problem fixed.” Nowhere are the changing times more evident than at the Chamber.

“There is every right for business to go to government to look for cooperative ways to resolve problems. There is no right for business to go to government to take care of their [own] follies and errors,” the Chamber’s chief executive officer, Tom Donohue, declared in 2002.

That was the same year Congress passed the Sarbanes-Oxley law, legislation that imposed greater disclosure requirements on businesses after a string of corporate accounting scandals.

A year later, insurance giant AIG and its companion Starr Foundation poured $15 million into the Chamber to help finance a campaign to roll back Sarbanes-Oxley.

The Chamber formed a commission for the mission and progress was being made. The SEC had begun loosening the rules on small businesses, and the business community found sympathetic allies even among the Democrats who rose to power in 2007.

But that was then, and this is now.

Provisions inside Sarbanes-Oxley that required chief financial and executive officers to certify that their public profits and losses reports truthfully reflected their financial condition are now being used to launch criminal probes by the SEC and the Justice Department.

And what became of AIG, arguably the primary funder of the Chamber’s effort to soften Sarbanes-Oxley? It’s now a quasi-governmental institution after Treasury earlier this month extended about $85 million in loans to keep it afloat.

And this week, the Chamber shed any trace of its typical small-government, no-regulation mantra.

“Extraordinary government intervention is essential to restoring confidence and ensuring credit availability,” the Chamber’s chief lobbyist, Bruce Josten, said in a letter to lawmakers.

“Stabilizing the financial system and preventing a systemic collapse of our capital markets must be the federal government’s top priority,” he added. “Speed is of the essence.”

In addition to its key vote alert, the Chamber on Monday sent out an urgent call to action to its members across the country urging them to lean on their lawmakers to vote for the rescue plan.

“Time is of the essence!” it read. “It is more important now than ever to urge your members of Congress to take immediate action to stop the impending financial crisis.”

On Monday, Josten said in an interview that the enhanced oversight in the bill may not create major burdens for the business community because it will apply only to those that seek help from Treasury.

But he acknowledged that the CEO salary cap was a bitter pill, one he believes the government might regret because it could limit the pool of candidates who would take over a bank rescued by the taxpayers.

“I would think you’d want the best and most effective person doing that,” he said.