Deal Or No Deal?

Earlier in the day, lawmakers in Washington expressed growing confidence that a bailout plan amenable to all sides could come to a vote soon.

Then Sen. Richard Shelby, R-Ala., the ranking Republican on the Senate Banking Committee, poked his head out of a meeting at the White House to tell cameras, "I don't believe we have an agreement."

House Republicans, angered over the plan's price tag, and proposals like expanded bankruptcy protection for mortgage defaults, have yet to come on board. "I am encouraged by the bipartisan progress being made toward an economic package," said House Republican leader John Boehner, R-Ohio, in a statement earlier Thursday. "However, House Republicans have not agreed to any plan at this point."

House Republicans are now pushing a plan that would require companies to buy insurance for troubled mortgage-backed securities rather than use taxpayer money to buy them. It would also give some firms tax relief and allow them to suspend dividend payments temporarily in order to free up capital.

Political posturing to show that they're on the taxpayers' side? Possibly. Whatever the case, it seems to be gumming up negotiations.

Thursday's developments were just the latest twists in the high-wire political showdown over the proposed $700 billion plan to bail out Wall Street's flailing banks or risk a spillover into the economy at large, which has left Congress enraged and the markets on tenterhooks.

Speaking to CNBC this afternoon, Rep. Barney Frank, D-Mass., the House Financial Services chairman, said an agreement was nearly complete. That proposal included equity protection for taxpayers, restrictions on executive compensation, a strong oversight provision and efforts to reduce mortgage foreclosure. The one sticking point: whether a bankruptcy clause should be applied to primary residences in the area of foreclosure relief.

"There really isn't much of a deadlock to break," Frank said. Still, it was not a done deal.

The bailout proposed by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke for the administration would allow the Treasury to buy up to $700 billion in bad debt from companies and would give broad powers to the Treasury to oversee the rescue.

The agreement reached between lawmakers maintained the $700 billion sticker price but proposed a phase-in of the money: $250 billion would be available immediately, $100 billion would be available with the president's approval and the remaining $350 billion would default to being distributed, but Congress would have the option to review the final allotment.

Details of how the agreement on executive compensation would work were unavailable. The Treasury was initially opposed to restrictions on executive compensation in the plan, fearing it would limit the number of firms that participated and thus be ineffective at reviving lending markets. After a fierce backlash from Congress, however, Paulson acknowledged that compromise was needed on executive compensation.

Paulson said to Congress that the money would be spent in phases, starting with the simplest "toxic assets" on Wall Street and gradually moving to the most complex mortgage-backed securities and collateralized debt obligations. Although all $700 billion would not be needed initially, Paulson said receiving all the money up front would send the strongest signal to the market.

"We are reviewing the proposal," a spokeswoman for the Treasury Department said. "Our focus remains the same: ensuring that the final package is effective."

Earlier, key Democratic and Republican lawmakers said that after a productive morning meeting they had reached a tentative agreement on the legislation.

"I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is still roiling in the markets,'' Sen. Robert Bennett, R-Utah, told reporters Thursday afternoon after the meeting.

Then they trooped up to the White House. Key lawmakers in discussions, including Frank and Senate Banking Committee Chairman Chris Dodd, D-Conn., met with President Bush starting at 4 p.m. Presidential candidates Barack Obama and John McCain also were in attendance.

Nobody else emerged from the meeting to speak immediately following Shelby. Speaking before the meeting, Bush had said he hoped a deal could be reached "very shortly."

Congressional leaders are unlikely to bring the vote to the floor until they are confident they have the votes to pass it. But leaders at this point can't even guess how their members will vote until they've publicized a tentative version of the proposed legislation.

Thursday morning, one of Washington's most influential lobbies, the U.S. Chamber of Commerce, a traditional ally of House Republicans, expressed confidence that lawmakers will vote on a bailout package soon. Bruce Josten, top lobbyist for the chamber, said that more small and medium-sized businesses that are members of the chamber are starting to feel the stresses placed on financial markets. As the stresses of capital markets spread to "Main Street," he said, congressmen from both parties are likely to come around on the legislation.

"I think they're now beginning to hear those Main Street concerns," said Josten. "They're beginning to see the magnitude of the problem."