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Monday was supposed to be the day the House approved a $700 billion rescue/bailout plan for the U.S. financial services sector. With Congress set to adjourn after approving the rescue and a few other bills, the week was shaping up to be a quick one.

However, with the House’s defeat of the bailout measure Monday, the legislative calendar has been thrown into upheaval. Rather than vote on tax package, it appears the House will reconvene Thursday in order to give the rescue bill another try.

Confusion seems to be running the day. Democratic leaders in the Senate, including Majority Leader Harry Reid (D-Nev.) and Banking Committee Chairman Sen. Chris Dodd (D-Conn.) have signaled they still want to work towards a vote on the measure. There is no agreement, however, as to what changes should or could be made to the bill, or whether the House or Senate should take up the revised legislation first.

The Senate, meanwhile, is working on a number of legislative goals. That body appears prepared to approve an Amtrak funding and rail-safety bill on Wednesday. Senators are also holding out for House consideration of a comprehensive tax package, though that appears unlikely. A number of popular provisions, including a fix for the alternative minimum tax, renewable energy tax credits, and disaster-relief rebates are in the package.

Also this week, the trial of Alaska Sen. Ted Stevens (R) continues, after the trial judge refused to declare a mistrial or dismiss the criminal case. The defense had sought a dismissal after accusing the prosecution of withholding evidence in the case. Read the rest of this entry or post a comment

With the nation’s eyes focused on negotiations over a proposed bailout of the U.S. financial sector, lawmakers worked into the weekend on several other critical pieces of legislation, including a continuing resolution to keep the government running through the election. The Senate also adopted a defense authorization bill, but could not find agreement with the House of Representatives on a series of tax proposals or on a stimulus package. In addition, the trial of Sen. Ted Stevens began Thursday.

Negotiations on the financial rescue bill appeared to break down Friday after House Republicans signaled they would not support the plan presented by the Administration. The Democratic leadership had tentatively approved that same deal, and a vote was expected early next week.

Democrats held out for a number of concessions. The Administration agreed to the need for an oversight board and will not object to limits on executive pay for firms participating in the bailout. Democrats are still hoping to insert language limiting the effort to an initial $300 billion. An additional $400 billion would require a joint resolution of Congress.

Click through for more on the week's action in Congress.
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New details have emerged about the Bush Administration’s plan to inject an estimated $700 billion into the country’s financial sector, which would be used to buy risky and possibly bad debt. Senate Banking Committee Chairman Chris Dodd (D-Conn.) has released a counter-proposal, which includes a number of restrictions not included in the original plan. Lawmakers from both parties have pledged to take action by the end of the week while also tackling a continuing resolution to keep the government operating past the end of the fiscal year next week.

Over the weekend, a draft of the Administration’s plan was leaked and members of the public (and some lawmakers) had their first opportunity to review the proposal. The legislation would give Treasury Secretary Henry Paulson broad authority to use federal funds to purchase assets that have no defined value, including loans that are unlikely to be repaid and securities backed by those loans. The government would purchase these assets from banks and other institutions through an auction or some other mechanism.

The plan precludes the courts, Congress or other federal agencies from reviewing the program and, while Paulson hopes to recover most of the funds by selling off the assets once the markets stabilize, there is no guarantee that the taxpayer money will be recovered.

Sen. Dodd’s proposal (leaked to the press Sunday night) introduces several measures that would substantially change the recovery program. Dodd’s bill creates an oversight board that would include congressionally-appointed officials. It also authorizes bankruptcy judges to modify existing mortgage loan terms for Americans facing foreclosure, and limit executive compensation for firms that take taxpayer cash.

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Coming off of the August recess, most expected the 2009 fiscal year budget and energy legislation to dominate the Congressional agenda for the five weeks until the scheduled October adjournment. However, with the recent shocks in the U.S. financial markets and the resulting calls for government action, Congress and President Bush scrambled to figure out their gameplans. Plus, Massachusetts had its congressional primaries and Don Young narrowly edged out his primary challenger in Alaska when the final votes were in.

Proposals for the crisis recovery scenario generally involve the government infusing the financial sector with massive funds, either through purchases of rapidly devaluing mortgage-based securities, loans, loan guarantees or purchases of large stakes in the companies, effectively making U.S. taxpayers the largest shareholders in some of the big Wall Street players.

The action to bail out Wall Street would have far-reaching effects. Not only would it supplant other congressional priorities this session, but the amount of money required would handicap domestic spending in the 111th Congress as well. That would leave little discretionary funding heading into the next congressional cycle, and a new president would have few options to pursue on the domestic spending front.

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