Readers Dean and Dwight wrote to tell me that CNBC is reporting that Senator Shelby (R-Alabama, and the ranking member of the Senate Banking Committed) came out of the White House waving the University of Chicago organized letter from economists objecting to the plan and said there was no agreement.
Given the apparent momentum to have this wrapped up by the end of the weekend, unless he is ready to filibuster, I think this is just noise, but stay tuned.
Update 5:50 PM. My initial cynical take may have been wrong. From MarketWatch (hat tip reader fredw):
President Bush was unable to seal a deal between Republicans and Democrats on his $700 billion mortgage rescue plan, officials said. “It was not a negotiating session,” said House Democratic Leader Steny Hoyer. The two presidential candidates, Sen. John McCain and Sen. Barak Obama, attended the meeting but left the White House without talking to reporters. A revolt among House Republicans appears to have emerged as the key stumbling block. Hoyer said that some plans have recently been put on the table that even Treasury Secretary Henry Paulson hasn’t seen. “On our side, there is a consensus on how to go forward, we’ll have to see if that consensus can grow,” Hoyer said. It was up to Bush to talk to Republicans, he added.
The House Republicans are apparently unwilling to risk the wrath of voters for the greater good of the financial services industry.
Update 8:10 PM: Dodd is trying to spin the House Republican revolt as positioning on behalf of McCain, as opposed concerns about the plan and fears of voter backlash. From the New York Times:
Looking tired and annoyed, Mr. Dodd complained that late complications were making the episode sound more like “a rescue plan for John McCain,” the Republican presidential candidate, than one for the country’s financial system.
It does no good, Mr. Dodd said, “to be distracted for two or three hours by political theater.”
The senator was apparently alluding to a growing revolt by conservative Republicans, and the fact that Senator McCain has not yet endorsed the plan, whose concept runs contrary to the policy positions he has taken for years.
Obama was more conciliatory:
Shortly afterward, Mr. Obama said in an interview on CNN that he was confident that a deal would be reached “eventually,” but he said, “I think there’s still some work that needs to be done….
The impression that much remains to be done was only reinforced by Mr. Dodd’s comments. After saying he still hoped for a deal, the senator said it was important to take “whatever time it takes” to arrive at a good arrangement, since the effects will be felt for “years and years to come.””
The account suggests that the deal broke down not over particulars, but over House Republican objections to the scale of the intervention.
Update 8:15 PM (hat tip Ed Harrison). Reuters gives more insight into why things broke down, and the charge that McCain was a spoiler may have some validity:
Democratic congressional leaders told party members on Thursday that a White House meeting to try to reach a deal on a financial market bailout package went badly, two Democrats said.
Rep. Brad Sherman, a California Democrat, told reporters after a party caucus meeting that it looked like Republican presidential candidate John “McCain and the Republican caucus are blocking this bill.”
McCain announced on Wednesday he was suspending he presidential campaign to return to Washington to work on the deal. He participated in a meeting at the White House with Democratic rival Barack Obama and key administration and congressional players in the negotiations.
Sherman said Democratic lawmakers were told that dealbreakers for the White House include mortgage bankruptcy reform and limits on the pay of the executives of companies that would sell assets to the U.S. Treasury under the bailout proposals.
“Bankruptcy reform is a dealbreaker for the White House” and so are corporate executive pay limits, Sherman said. “On more than one occasion, the statement was made that if we put that in the bill, the president will not sign it,” he said.
Rep. Allen Boyd, a Florida Democrat, said McCain’s visit to the White House threw the negotiations over the bailout package into disarray.
“What’s he done? This did not help matters … it just makes it much more complicated,” Boyd said. “McCain has come in and tried to play the hero.”
I have been a huge opponent to this bill, but the notion that McCain would try to gamble with the financial system to score points stinks to high heaven. So the Fed will do some heroic interventions, probably including a rate cut (this was under consideration but has now probably moved to being a certainty) to counter the dashed expectations. If there is not a complete systemic collapse, McCain will claim to have been a hero even thought it was the House Republicans, not any move in the Senate, that was the main obstacle.
In Venezuela, they say that a politician is someone who will get in front of a mob and call it a parade.