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Bush's $700 billion bailout package in trouble

By Sridhar Krishnaswami in Washington
September 24, 2008 19:25 IST
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President George Bush's whopping $700 billion bailout package to rescue American banks from bad debts appears to have run into trouble with the Untied States Congress ready for a fierce showdown against the plan, which has raised hopes in global markets.

The lawmakers on Wednesday served notice that it was hard for them to approve the package in the current form despite a strong pitch made for its swift passage by top administration officials, including Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson.

For all the anticipated speed with which the Bush administration and members of Congress moved the massive financial bailout, all indications now are that the passage of the package was moving at snail's pace and would not be easy.

The financial bailout had a cold reception from lawmakers in the backdrop of reports that the Federal Bureau of Investigation was investigating fraud allegations against several financial companies that have been bailed out by the administration in recent days.

According to media reports, the FBI is looking at potential fraud by mortgage giants Fannie Mae and Freddie Mac and the Insurance giant, American International Group Inc Lehman Brothers is also said to be under the eye.

A deep divide has appeared between top administration officials, including Bernanke and Paulson, and the Congress leaders who were cool to the urgency being shown by the administration.

The two top Bush administration officials said that lawmakers should pass the emergency measures swiftly or the entire US economy would be put at risk.

Worried about what was happening on Capitol Hill, especially the rising scepticism among Republican lawmakers, the White House dispatched Vice President Dick Cheney to Capitol Hill on Tuesday to rally the Grand Old Party.

Cheney came in for some tough talking by the Speaker of the House, Nancy Pelosi, who said she will not allow Democrats to left holding the bag, unless there is substantial Republican support for the bailout.

However, Senator Christopher Dodd, Chairman of the Senate Banking Committee said both Democrats and Republicans had expressed lot of reservations.

Bush's bailout proposals would arm the government to buy up piles of bad mortgages and bad subprime loans which has sparked the current worldwide economic crises.

Taken together with the legislative strategy that the administration and members of Congress are planning, it raises larger questions on other issues pending before the House.

One legislative strategy for the Indo-US nuclear deal was to tag it to a Omnibus Continuing Resolution to fund the federal government beyond September 30 but also include the bailout package.

Given the time constraints the Acting Chairman of the Senate Foreign Relations Committee, Senator Christopher Dodd, last week virtually ruled out the prospect of the civilian nuclear agreement going about as a stand alone legislation.

On Capitol Hill and in a day of hectic committee meetings in the House of Representatives and the Senate, lawmakers echoed the outrage of the common person, that while he or she is being taken for a ride in the financial markets tumble, sympathies are still being expressed for the fat-cat executives who may have been responsible for the crises.

To this effect, top lawmakers in the House and Senate want Congress to have a say in the financial packages of the executives including the so-called Golden Parachutes or what has been perceived as scandalous exit payouts.

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Sridhar Krishnaswami in Washington
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