US Congress, Bush team agree on some bailout terms

WASHINGTON -- Scrambling for a quick accord on the $700 billion bailout, the Bush administration and leading U.S. lawmakers have agreed to include mortgage aid and strong congressional oversight along with unprecedented help for failing financial institutions, a key lawmaker said Monday.

Unimpressed, investors sent stocks plummeting anew, pushed oil up $16 a barrel and propelled gold prices ever higher as they searched for a safe place to park their money.

President George W. Bush prodded Congress to pass the administration's rescue plan quickly, declaring, "The whole world is watching." And there did seem to be movement in talks between the White House and lawmakers.

Rep. Barney Frank, a Democrat and chairman of the House Financial Services Committee, said "a great deal of progress has already been made." And a government official with knowledge of the talks said the administration had agreed to create a plan to help prevent foreclosures on mortgages it acquires as part of the bailout -- a key demand of Democratic lawmakers.

Under other additions the Democrats are adding to the administration package, according to a draft of the plan obtained by The Associated Press:

-- Judges could rewrite mortgages to lower bankrupt homeowners' monthly payments.

-- Companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives' pay packages and agree to revoke any bonuses awarded based on bogus claims.

The proposal by Sen. Chris Dodd, a Democrat and the Banking Committee chairman, would give the government broad power to buy up virtually any kind of bad asset -- including credit card debt or car loans -- from any financial institution in the U.S. or abroad in order to stabilize markets.

But it would end the program at the end of next year, instead of creating the two-year initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.

The plan also would require that the government get shares in the troubled companies helped by the rescue.

Wall Street did not seem comforted. The Dow Jones industrials were down nearly 400 points near the end of the trading day.

Investors were uncertain just how successful the administration's plan will be in unfreezing credit markets, which many businesses depend on to fund day-to-day operations, and for propping up the still-weak housing market.

Congressional aides said the House could act on a bailout bill as early as Wednesday.

Bush said, "Obviously, there will be differences over some details, and we will have to work through them. That is an understandable part of the policy making process." But he also said, "It would not be understandable if members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan."

The proposal that Dodd sent to Treasury Secretary Henry Paulson would let judges modify the mortgages of homeowners in bankruptcy to allow them to keep their homes.

It also would require that the government come up with "a systematic approach for preventing foreclosure" on the mortgages it acquires as part of the bailout. That would include the home loans held by Fannie Mae and Freddie Mac, the troubled mortgage giants now under the control of a government regulator.

Treasury spokeswoman Brookly McLaughlin said, "We are confident that we can get a bill done this week."

The fast-moving negotiations between the administration and Congress unfolded a day after the government approved a request by investment houses Goldman Sachs and Morgan Stanley to change their status to bank holding companies.

Frank said that lawmakers "are building strong oversight" into the new bailout measure.

"The private sector got us into this mess," he said, "The government has to get us out of it. We do want to do it carefully."

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Stocks tumbled Monday as investors grew nervous about an amorphous government plan to buy $700 billion in banks' mortgage debt. While investors last week were relieved that federal authorities were constructing a plan to rescue banks from their toxic assets, many weren't waiting for the details to emerge before seeking safety. The dollar skidded lower, contributing to a jump in oil. Gold prices also rose.

The Dow Jones industrial average fell 372.75, or 3.27 percent, to 11,015.69.

The Standard & Poor's 500 index fell 47.99, or 3.82 percent, to 1,207.09.

The Nasdaq composite index fell 94.92, or 4.17 percent, to 2,217.98.

For the year:

The Dow is down 2,249.13, or 16.96 percent.

The S&P is down 261.27, or 17.79 percent.

The Nasdaq is down 473.30, or 17.85 percent.