Discussions to hammer out the details of the Bush Administration’s $700 billion financial sector bailout continue today on Capitol Hill. George W. Bush has invited both presidential nominees, Senator Barack Obama (D-Illinois) and Senator John McCain (R-Arizona), to take a break from their campaign trails and join in the debate in Washington, D.C. Thursday afternoon.
Lawmakers have managed to drum up bipartisan support to include two important measures in the bailout legislation. The new bill will establish an oversight committee to supervise Treasury Secretary Henry Paulson’s dissemination and use of buyout funds. And although the Bush Administration originally said that the executives of those institutions helped should not have their salaries capped because it would discourage their cooperation, it has now agreed with Congress to limit executive compensation.
One crucial issue however, that legislators have not been able to agree upon is providing assistance to troubled homeowners in default or facing foreclosure, a problem at the root of the financial sector crisis. Earlier this week, 35 U.S. consumer, labor, and civil rights groups – including the Center for Responsible Lending, the Leadership Conference on Civil Rights, the National Community Reinvestment Coalition, and the National Fair Housing Alliance, among others – sent a joint letter to members of Congress, urging them to include court-supervised mortgage restructuring for American homeowners to allow them to save their homes. “Purchasing subprime and Alt-A private securities will not provide the government with any legal ability to modify loans and keep families in their homes, which is necessary to stop the crisis,” the letter said.

The authors of the letter stated that for a year now, they have advocated Chapter 13 judicial modification relief as the most effective way, at no cost to taxpayers, to prevent foreclosures. According to Martin Eakes, CEO of the Center for Responsible Lending, 90 percent of the government’s proposed securitization purchases will have utterly no impact on the underlying home loans. Eakes says that giving homeowners access to assistance through bankruptcy courts is the only solution that will actually make a real difference.
In its own letter to Congress, the Mortgage Bankers Association (MBA) said that it supports a quick passage of the bailout legislation, but “opposes adding unrelated proposals to the bill, primarily efforts to allow judges to alter residential mortgages in bankruptcy.” John Courson, COO of the MBA, said “We will continue to oppose efforts to give judges the authority to cram down legitimate mortgage debt.” Courson argues that the Bush Administration’s rescue plan is not a mortgage or housing bill, and that lawmakers will be able to address these issues later, building on the work they’ve already done. Courson said that changing bankruptcy to include primary residence mortgage debt will raise the cost of credit and further destabilize the market.
Another sticking point in the language of the bailout bill is the payment schedule of the $700 billion. Congressional Democrats are arguing for structured installment payments to be administered over a set period of time of as much as two years.
Despite a clashing of views on these points, both Democrats and Republicans have expressed confidence that the rescue plan is moving forward and a bipartisan consensus could be reached as soon as first part of next week.
Last night, President Bush broke into network television programming with a live message to the American people, in which he stressed the necessity of an immediate rescue plan that committed $700 billion in taxpayer money. Although Bush took great pangs to explicitly explain what such a buyout would mean to the common taxpayer, his words did little to quell growing dissent, and even anger, from the general population. CNN reported from the heart of Montana today, that objections are flooding into Congress representatives’ offices, a sentiment that is mirrored across the country. Protest rallies are reportedly being held in 130 cities today. _CNN _said the protests are a strong testament to Washington’s extreme disconnect from its American constituents.