Democrats eye bailout ??? and more

Senate Banking Committee Chairman Chris Dodd promised that the emergency financial legislation aimed at saving the economy would not become a “Christmas tree” lit up with expensive legislative ornaments.

But in the same breath, Dodd insisted that he would try to dangle a measure to prevent housing foreclosures from the bill.  

And therein lies the problem.

Congress is moving with unusual alacrity to give the Treasury unprecedented powers over the nation’s financial infrastructure. But lawmakers being lawmakers, they can’t seem to resist trying to use this emergency as an opportunity to piggyback on a must-pass bill.

Publicly, Democrats and Republicans have vowed to draft and pass a clean, bipartisan bill that simply allows the Treasury Department to stop the bleeding on Wall Street.

But with the Banking Committee as the nexus of power for emergency legislation being written this weekend, Democrats are mulling over just how much they can demand in the economic package without looking like they’re exploiting the situation.

“We've got to deal with the foreclosure issue,” Dodd said. “This plan must include that.”

But that’s just a start.

House Majority Whip Jim Clyburn (D-S.C.) believes that “any plan moving forward should include a component to protect Main Street from the crisis on Wall Street and provide financial stability to American families struggling in today’s uncertain economy.”

Democratic aides in both chambers have laid out for Politico a laundry list of other items the party may want to add to the Treasury bill:

• Bankruptcy protection for homeowners. Some Democrats see this bill as a golden opportunity to renew their push for a proposal that would allow bankruptcy judges to unilaterally restructure home mortgages for those facing bankruptcy. Such a measure failed earlier this year when it was included in a larger housing bill because Republicans balked at granting the power to bankruptcy judges. But now that the federal government is poised to assume responsibility for hundreds of billions in bad debt, Democrats see a good selling point in pitching the idea that consumers should get a break, too.

• Social spending and infrastructure funds. The most liberal Democrats are pushing to have an economic stimulus package — with unemployment extensions, infrastructure spending and aid to states — tacked on to the bill. But Speaker Nancy Pelosi (D-Calif.) is trying to get her caucus to hold off, fearing it could delay the critical Treasury package, according to Democratic aides.

• Corporate governance rules. Both sides would love to take their pound of flesh from Wall Street titans being saved by the bailout. But Democratic aides said that more stringent regulations and perhaps a crackdown on CEO compensation is a longer term discussion that may need to wait.

• Foreclosure protection. Dodd was intentionally vague when he insisted on foreclosure protection for homeowners, because he does not want to bog down the Treasury legislation before he even sees the Bush administration’s bill. But the driving idea is to give Main Street the feeling that it, too, will benefit from what appears to be a trillion dollar Wall Street bailout.

With only a week or two before Congress adjourns for elections, congressional leaders expect a struggle to contain the legislative urges of their rank and file members, who are desperately trying to respond to constituents wondering why Washington appears to be ignoring the little guy.

“I'm getting a lot of calls from my district, with people saying, why are you bailing out the big guys and not us?” said Rep. Steve LaTourette (R-Ohio). “We have to communicate the fact that if the big guys fail, then your savings, your retirement, your mortgage will be in trouble.”

On the opposite end of the spectrum, Republicans are warning that any attempt to expand the Treasury legislation will spoil the bipartisan cooperation prevailing at the Capitol today.

“It would be a huge problem if the package were used that way [to add extra items],” Sen. Judd Gregg (R-N.H.) said. “That could poison the well. We have to keep this clean.”

Sen. Lamar Alexander (R-Tenn.) warned that both sides need to take the cue from Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke and realize that the situation is so dire that partisan desires must be kept in check, at least until the bill clears Congress next week.

“This is a very serious matter, and Congress needs to carefully consider the Treasury secretary’s proposals,” Alexander said. “This is no time for partisan politics. We must act responsibly and consider only what is in the nation's best interest.”