WASHINGTON (MarketWatch) -- Democratic congressional leaders announced their agreement Sunday on details of a massive financial rescue plan proposed by the Bush administration, releasing a draft text trumpeting taxpayer guarantees and caps on executive compensation.

The draft bill, titled the "Emergency Economic Stabilization Act of 2008," follows days of legislative wrangling over a $700 billion plan proposed by Treasury Secretary Henry Paulson as U.S. financial markets teetered on the edge of a collapse triggered by the U.S. mortgage crisis.

The bill will be introduced in the House of Representatives Monday morning and then head to the Senate, said Senate Majority Leader Harry Reid, D-Nev.

"This isn't about a bailout of Wall Street, it's a buy-in so we can turn our economy around," House Speaker Nancy Pelosi, D-Calif., said at a press conference announcing the agreement.

The draft legislation would authorize $250 billion immediately, with another $100 billion upon presidential certification. A further $350 billion would also be available subject to congressional approval.

"I appreciate the leadership shown by members on both sides of the aisle, who came together to write a very good bill," President Bush said in a statement. "This bill provides the necessary tools and funding to help protect our economy against a systemwide breakdown."

Under the proposed bill, the Treasury Department can use a combination of tactics to buy bad loans, focusing on mortgages and mortgage-backed securities but also including other types of loans under certain conditions. Treasury could purchase the bad debt through an auction process as well as by buying loans directly, a Treasury official said in a conference call with reporters.

The proposed legislation also allows companies to participate in an insurance program, whereby Treasury would guarantee troubled assets, charging companies a premium "sufficient to cover anticipated claims," according to the bill.

"This bill provides the necessary tools to deploy up to $700 billion to address the urgent needs in our financial system, whether that be by purchasing troubled assets broadly, insuring troubled assets, or averting the potential systemic risk from the disorderly failure of a large financial institution," Treasury Secretary Henry Paulson said in a press release.

"I am confident this legislation gives us the flexibility to unclog our financial markets [and] increase the ability of our financial institutions to deliver the credit that will help create jobs. We are taking the steps needed to be ready to begin implementing this legislation as soon as it is signed," he said.

The government would get a stake in companies receiving bailout funds so that taxpayer money could be recovered if those companies grow in the future, according to the bill.

The proposed legislation also requires that in five years, the president submit a proposal to Congress "that recoups from the financial industry any projected losses to the taxpayer." Read proposed legislation

Existing executive-pay contracts will stay in place

In some cases, the bill requires companies limit executive pay, but those limits vary depending on the method by which Treasury purchases a firm's troubled assets, and how much Treasury antes up.

"When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000," according to a synopsis of the text of the bill.

While the proposed bill prevents companies from signing new golden-parachute deals with top executives after Treasury gets involved, it does not change the terms of already-existing contracts, apparently in an effort to encourage companies to participate in the bailout program.

"Those are contractual obligations between a company and their employees," the Treasury official said. "We want to encourage all institutions, even healthy institutions, to participate," he said, adding that "we're not abrogating contracts."

In situations where Treasury steps in to directly purchase a company's bad loans, the government will move "aggressively" to ensure executive compensation isn't excessive, the official said. "In one-off negotiations, then we would be imposing executive compensation standards that the secretary will define. That's nothing new. We've expressed a strong view [in the past] when it comes to executive compensation."

Keeping an eye on progress

The bill puts oversight provisions in place, including creating the position of an inspector general as well as a congressional oversight panel to monitor the program, plus a requirement that the Treasury secretary regularly report to Congress the details of all loan purchases.

Also, "all of the transactions related to this legislation will be on the Internet within 48 hours," Pelosi said. "That transparency, that oversight, will be very important to our economy."

The bill also contains some provisions to help families in financial distress avoid foreclosures, in part by creating a plan to "encourage services of mortgages to modify loans" and allowing the Treasury to use loan guarantees to avoid foreclosures.

While critics have noted that government encouragement won't necessarily impel servicers to work with borrowers, the Treasury official said that buying large groups of loans will help push that process forward. "Treasury will be buying many of the securities in volume. We will have a lot of influence on the servicers and we will work aggressively to ... prevent foreclosures," the official said.

Candidates weigh in

Before the release of the draft text, presidential candidates John McCain and Barack Obama said Sunday morning that they would be willing to sign off on the massive financial rescue plan but would need to first consider the details. See full story.

When asked if he supported the plan, McCain told ABC's This Week: "I'd like to see the details, but hopefully yes. ... This is something we'll all swallow hard and go forward with."

Obama told CBS's Face the Nation: "We have to get something done. ... My inclination would be to vote for it, understanding that I'm not happy about it -- we should have never gotten to this place."