Taxpayer Protections Gain Support

Under the administration’s plan, the government would spend as much as $700 billion to purchase mortgage-related assets that are foundering from Wall Street firms. The long-term financial impact on the government would be highly uncertain. The losses could be staggering, but it also is possible the government eventually would recoup some — or perhaps even all — of the cost it incurs, depending on how the mortgage market performs.

Draft bills from Senate Banking Chairman Christopher J. Dodd , D-Conn., and House Financial Services Chairman Barney Frank , D-Mass., would put restrictions on compensation for executives at companies that participate in the bailout program.

Senate Finance Chairman Max Baucus , D-Mont., introduced a draft tax title Tuesday including, among other provisions, language that would limit the deduction that companies can take for executive pay and so-called golden parachutes. (See story, p. 8)

The Democrats’ plans also would allow the government to demand a stake in companies that participate in the program. Thus, if the companies returned to profitability, the government would share in some of those future profits as a way of recouping expenses.

The administration has opposed both proposals.

But Senate Minority Leader Mitch McConnell , R-Ky., said Tuesday he supported the executive compensation proposal. “I think it’s a good idea,” he said.

On allowing the government to have a financial stake in — and potentially make money from — struggling companies, McConnell noted that Republicans “want to wait and see what the package looks like and then make a decision.”

Some other Republicans were warming to that idea, though the exact mechanism was under debate. “ Barney Frank has it right on that one,” said Sen. Tom Coburn , R-Okla., who has long opposed major spending bills but left the door open to voting for the bailout, so long as it includes an equity stake for taxpayers.

Republican presidential candidate Sen. John McCain of Arizona and his Democratic rival, Sen. Barack Obama of Illinois, have also advocated more oversight of the Treasury plan and limits on executive pay at companies that benefit from the program.

Hostile Reception

As Treasury Secretary Henry M. Paulson Jr. pushed the plan before the Senate Banking Committee on Tuesday, Democrats and Republicans slammed it. But several Republicans expressed support — sometimes qualified — for the conditions that top Democrats have proposed.

Michael B. Enzi , R-Wyo., drew cheers from the audience when he argued that while he has “no illusions” about the urgency of the situation, it should not be done “without a guarantee of proper oversight and accountability for the taxpayer.”

Enzi noted the Treasury plans lack “equity sharing or loss mitigation” to protect taxpayers. He said that complaints that “punitive measures” would discourage participation and undermine the plan “offends common sense.” The administration has argued that companies might not participate in the plan if limits on executive pay were included.

Taxpayer Protections Gain Support

Michael D. Crapo , R-Idaho, indicated support for the idea of a government stake in the companies that participate, noting that “the question as to what type of investment [is made] . . . is critical.”

In a separate interview, John Ensign , R-Nev., said he understands there is widespread agreement that something must be done to help Wall Street. Still, he has some concerns about the current plan.

“I don’t think taxpayers are protected enough in it,” Ensign said, though he would not elaborate on what specific safeguards for consumers he’d like to see in the bill.

With a general election just weeks away, Ensign, who heads the Senate GOP campaign organization, conceded it would be tough to vote either way.

But at the end of the day, he thinks most lawmakers will vote for the measure regardless of how it plays at home. “People have to understand that if we don’t do something it won’t just mean a meltdown on Wall Street, but a meltdown on Main Street,” Ensign said.

House GOP Criticism Louder

Many House Republicans took a tougher line.

Iowa Republican Steve King , who listened to the vice president address the GOP Conference, came away worried that the administration’s plan would result in the end of the free market.

“Providing taxpayers’ dollars to inject capital into private companies that are too big to fail results in the nationalization of some of those companies. My fear is that nationalization morphs into socialization — there’s no plan to go back and reprivatize even Fannie or Freddie,” King said, referring to mortgage giants Fannie Mae and Freddie Mac, which were taken over by the government this month.

Leaders of the conservative Republican Study Committee, which has more than 110 members, said they oppose the Bush administration plan and also oppose ideas proposed by Democrats that they said would increase government control over huge parts of the national economy.

“I believe the president is right to call on Congress to act, but nationalizing everybody’s mortgages is not the right way,” said Mike Pence , R-Ind. “They say we must act now. The last time I heard that was on a used-car lot.”

Joe L. Barton , R-Texas, also said he objected to the pressure to act this week. “The lord made the world in seven days. That doesn’t mean we have to solve this problem in five days,” Barton said.

House conservatives unveiled an alternative Tuesday that includes a suspension of capital gains taxes.

Taxpayer Protections Gain Support

It also includes an expedited opening of the Arctic National Wildlife Refuge and the nation’s offshore outer continental shelf to oil exploration as a way to raise revenue to partially offset the costs of government efforts to rescue the financial sector.

Edward Epstein, Phil Mattingly, Alan K. Ota and Molly K. Hooper contributed to this story.