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Negotiations continued Friday to revive the White House-backed initiative, a day after talks broke down in heated disagreement over the scope and cost of the unprecedented government intervention. The measure would remove billions of dollars in bad mortgages and other risky assets from banks’ balance sheets in a bid to calm frenetic financial markets and soothe a jittery public.
Some conservative GOP lawmakers Thursday denounced the plan as an unnecessary federal intrusion into the private sector and proposed a dramatically different scheme under which financial firms with bad assets would pay the Treasury to insure them, rather than sell them outright to the government. It was unclear what form the final proposal would take, though lawmakers from both parties reported making progress on a plan late Friday.
House Speaker Nancy Pelosi told fellow Democrats during a private meeting Friday that the legislation would not let judges rewrite mortgagesto help bankrupt homeowners avoid foreclosure. That provision amounted to a deal-breaker for Republicans, whose votes are needed to pass the measure, she said, according to lawmakers at the meeting.
Democrats and Bush administration officials said they were willing to include House Republicans' idea of having the government insure distressed mortgages — but only as an option, rather than a replacement for the administration's more sweeping approach.