WSJ.COM:Lawmakers Reach Tentative Bailout Deal

• SEPTEMBER 28, 2008, 2:01 A.M. ET

Warren Buffett has had an input into the $700 billion bailout so no wonder the Omaha Oracle backed the corporate welfare policy earlier this week when interviewed on CNBC.

He is sailing a bit close to the wind in my opinion.

Top U.S. policy makers emerged from hours of tense negotiations with a clear message just after midnight Sunday morning: A deal to bailout U.S. financial markets has been agreed on and all that remains to be done is to commit the legislation to paper.

Associated Press

House Speaker Nancy Pelosi, Treasury Secretary Henry Paulson, right, Senate Majority Leader Harry Reid, second left, and Sen. Judd Gregg, left, announce a tentative deal on legislation regarding the financial crisis just after midnight Sunday.

Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi (D., Calif.), and Senate Majority Leader Harry Reid (D.), were flanked by key negotiators in the Capitol as they announced that a $700 billion plan to have Treasury buy up toxic assets had been all but finalized after hours of exhausting negotiations.

"I think we"re there," an exhausted Mr. Paulson said, a sentiment echoed in the statements of negotiators such as House Financial Services Chairman Barney Frank (D., Mass.) and Senate Banking Committee head Christopher Dodd (D., Conn.)

Those present said the bailout plan still needs to be drafted in its final form, but a formal announcement should come some time Sunday. The plan is likely to include limits on executive compensation for some firms, as well as give the government some authority to take equity stakes in firms that sell soured assets to the U.S. government.

"We worked out everything," said Sen. Judd Gregg, the chief Senate Republican in the talks. He said the House should be able to vote on it Sunday, and the Senate could take it up Monday.

"We"ve had a lot of pleasant words," Sen. Reid said, "and some that haven"t always been pleasant."

The White House said it was pleased with the talks" progress. "We appreciate the bipartisan effort to deal with this urgent issue," White House spokesman Tony Fratto said.

The next step will involve selling the deal to rank-and-file lawmakers, who have been unhappy over signing on to a giant bailout package just weeks before the November elections. House Minority Whip Roy Blunt (R., Mo.) said that he planned to talk to colleagues and get reactions.

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

Lawmakers had entered a new round of meetings shortly after 7:30 p.m. EDT Saturday, with pizzas headed to one office and a platter from sandwich shop Cosi being delivered into the House Speaker"s office. By roughly 11:30 p.m., what Sen. Reid described as a "breakthrough" came in the form of an idea from Sen. Pelosi that was enough to advance talks.

She found middle ground with other negotiators on provisions aimed at allowing the federal government to recoup money for taxpayers if the asset-purchase program isn"t making money after a certain amount of time. A House leadership aide said early Sunday morning that details were not immediately available because the staff was still finalizing language, but that the general concept was to provide Congress with a mechanism that would be triggered at some point in time -- likely within five years -- that would allow lawmakers to offset some, if not all, of the bailout costs.

One idea that has been floated by both conservative House Democrats and Senate Democrats has been to create a deposit insurance fund similar to the one operated by the Federal Deposit Insurance Corp. for bank accounts. A Senate aide said they were pushing provisions that would address such concerns, mainly by assessing fees on a wide swath of financial institutions over a certain asset size to create a privately-funded rescue fund to pay for any future and current bailouts.

Offers and counteroffers were flowing back and forth all night. Among the offers extended by Democrats: an agreement to drop a proposal to devote 20% of potential profits to an affordable housing fund, according to a Senate staffer close to the talks.

One of the biggest sticking points involved concerns that executives at troubled financial institutions would wind up benefiting from handsome pay packages as the government took on more risks. But Democrats emerging from the talks said a whole array of issues related to executive pay had been addressed, including issues involving "golden parachutes," the big pay packages that are sometimes awarded to departing executives.

Congressional negotiators had consulted with outside experts including billionaire investor Warren Buffett amid a focus on market reaction to the plan.

"We"ve had Warren Buffett on the phone tonight, other experts that we"ve been consulting," Sen. Kent Conrad (D., N.D.) told reporters Saturday as he walked through the U.S. Capitol. He declined to identify other people with whom lawmakers consulted.

Schumer, left, Sen. Max Baucus and Sen. Jack Reed take a short break during ongoing negotiations on Capitol Hill on Saturday.]" vspace="0" width="262" border="0" height="174" hspace="0"> Associated Press

Sen. Charles Schumer, left, Sen. Max Baucus and Sen. Jack Reed take a short break during ongoing negotiations on Capitol Hill Saturday.

The bailout negotiations took a step forward Friday, when Senate Democrats agreed to include an insurance-based scheme as an option as part of the Wall Street bailout package in a bid to win support of House Republicans, who have been the main obstacle to reaching an agreement.

Sen. Charles Schumer (D., N.Y.) said that while Democrats would allow the insurance idea to be included, he didn"t think that any financial firms would choose to take part in such a scheme. "I offered on behalf of Sens. (Christopher) Dodd and Reid that we would put their proposal in as an option," said Mr. Schumer. "No one would have to use it, but it would be there as an option."

Initially there were to be four lawmakers -- one representing each party in both houses of Congress at the talks. They were Messrs. Gregg and Dodd in the Senate and Reps. Barney Frank (D., Mass.) and Blunt in the House. Mr. Frank is the chairman of the House Financial Services Committee, Mr. Blunt is the Minority Whip, while Mr. Dodd is the chairman of the Senate Banking Committee hearing, and Mr. Gregg is the ranking member on the Senate budget panel. But they were joined by several other senior Democrats, and there are as of late Saturday nine Democrats in the room compared with just the two Congressional Republicans, and Paulson.

After an apparent agreement was announced by lawmakers Thursday, House Republicans threw a wrench into the process by saying they would not support the deal, proposing instead their own alternative plan. That plan would be based around the idea of an industry-funded insurance pool to provide certainty to the markets, rather than a taxpayer-funded scheme.

�Corey Boles and Sarah Lueck contributed to this article.



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