Talks over a massive bailout for the U.S. financial system stumbled as they entered their most critical hours, with some Republicans working yesterday to undermine a deal between key congressional leaders and reinvent the plan put forward by the Bush administration one week ago.
Early yesterday, Democratic and Republican leaders said they had reached agreement on the “fundamentals” of a deal. But at a meeting later at the White House that included President Bush, top lawmakers and both presidential candidates, House Minority Leader John A. Boehner (R-Ohio) mentioned a new plan for addressing the crisis that has hobbled global markets.
Under the plan, the government would set up an expanded insurance system, financed by the banks, that would rescue individual home mortgages. The government would not have to buy up the toxic mortgage-backed assets that are weighing down financial institutions.
The proposal angered Democrats, who accused Boehner of acting on behalf of GOP presidential candidate John McCain (R-Ariz.) in trying to disrupt a developing consensus. It also displeased White House officials, including Treasury Secretary Henry M. Paulson Jr., who — half-jokingly — dropped to one knee and pleaded with the lawmakers not to “blow up” the deal, according to two people present at the meeting.