Politico

Following another rocky week on Wall Street, the economy and its effect on the presidential race is the focus of this Sunday’s talk shows.

ABC’s “This Week” leads the way with two congressional figures key to passing the bailout bill: House Minority Whip Roy Blunt (R-Mo.) and House Financial Services Committee Chairman Barney Frank (D-Mass.).

Expect a lively discussion between the two men, as many House Republicans have criticized Frank for not doing enough to regulate mortgage giants Fannie Mae and Freddie Mac, while Frank has accused the GOP of unfairly blaming poor people for the housing crisis.

Host George Stephanopoulos then breaks down another busy week in politics with New York Times columnist Paul Krugman, The Washington Post’s Dan Balz, and ABC’s George Will and Cokie Roberts.

NBC’s “Meet the Press” leads with an in-depth look at the economy, featuring Obama backer and New Jersey Democratic Gov. Jon Corzine and McCain supporter and former Rep. Rob Portman (R-Ohio).

Will they predict more doom and gloom? Or is the Dow poised for a rebound?

Moderator Tom Brokaw then leads a roundtable discussion on the economy with CNBC’s Erin Burnett, The Wall Street Journal’s Paul Gigot and journalist Ted Koppel.

“Fox News Sunday” offers an inside look at two other critical battleground states, featuring interviews with Democratic Gov. Ed Rendell of Pennsylvania and Republican Gov. Tim Pawlenty of Minnesota.

Then host Chris Wallace moderates a debate between Obama adviser David Axelrod and McCain campaign manager Rick Davis.

CBS’s “Face the Nation” also looks at some key swing states, featuring top surrogates from Virginia, Colorado and Florida.

Host Bob Schieffer interviews Colorado Democratic Gov. Bill Ritter, former Virginia Democratic Gov. Douglas Wilder and Florida Republican Rep. Adam Putnam.

McCain confidant Sen. Lindsey Graham (R-S.C.) rounds out the CBS lineup.

The economy also takes center stage on CNN’s “Late Edition,” which features an interview with former presidential candidate and current McCain supporter Steve Forbes.

Former Clinton Labor Secretary Robert Reich offers the Democratic perspective on another tumultuous week on Wall Street.

Host Wolf Blitzer then interviews a pair of senators, as New York Democrat Charles Schumer and Pennsylvania Republican Arlen Specter offer their perspectives.

Then, Blitzer chats with Obama supporter Rep. Debbie Wasserman-Schultz (D-Fla.) and McCain backer Rep. Heather Wilson (R-N.M.).

Finally, Bloomberg’s “Political Capital” features an interview with Democratic Congressional Campaign Committee Chairman Rep. Chris Van Hollen (D-Md.).

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With the bailout vote in the rear view mirror and the stock market still spiraling downward, Rep. Henry Waxman (D-Calif.) found a new target Tuesday, questioning why insurance giant American International Group took executives to an exclusive resort, less than week after the federal government bailed out the struggling company.

Waxman’s House Oversight and Government Reform Committee heard from two former top AIG executives in a hearing on what led the company to the brink of collapse, only to be rescued by an $85 billion bailout on Sept. 16. It was Waxman’s second hearing in as many days on the financial collapse. On Monday he took Lehman Bros’ CEO Richard Fuld to task for his role in that company’s failure.

Then he trained his sights on AIG.

“Less than one week [after the government intervened], AIG held a week-long retreat for company executives at the exclusive St. Regis Resort in Monarch Beach, Calif.,” said Waxman in his opening statement.

“Invoices provided to the Committee show that AIG paid the resort over $440,000, including … $23,000 in spa charges.”

An AIG spokesperson later told Bloomberg News that the trip was scheduled a year earlier to reward top salespeople from the company’s life insurance business. 

While Lehman and AIG are rich targets for congressional inquiries, Waxman has come under fire for not scheduling investigative hearings into Fannie Mae and Freddie Mac, much to the dismay of Republicans.

On Tuesday, former AIG CEO Maurice Greenberg was expected to testify, but canceled his appearance due to illness, leaving only former CEOs Martin Sullivan and Robert Willumstad.

Like he did with Fuld on Monday, Waxman chastised the executives for what he saw as a failure to accept responsibility for the company’s collapse.

“In each case, they refuse to accept any blame for what happened to their companies,” Waxman said. “In each case, the companies and their executives grew rich by taking on excessive risk. … And in each case, their executives are walking away with millions of dollars while taxpayers are stuck with billions of dollars in costs.”

Waxman also cited internal documents alleging that AIG executives hid the full extent of the firm’s risky business ventures from auditors.

Sullivan and Willumstad defended their actions, instead blaming complex accounting rules that forced the company to take on billions of dollars in losses.

However, former SEC Chief Accountant Lynn E. Turner bristled at the CEO’s defense during the hearing, arguing that blaming the accounting rules for the losses is like “blaming the thermometer…for a fever.”

And with Wall Street already under scrutiny after Congress approved a $700 billion bailout last week, AIG’s expensive corporate retreat gave many committee members the opening they needed to sound off.

"They were getting their manicures, their pedicures, massages, their facials while the American people were paying their bills," said Rep. Elijah Cummings (D-Md.).

Republican Rep. Mark Souder of Indiana also piled on, saying that the “unbridled greed” of many Wall Street executives is “so disgusting it’s hard to put into words.”

Later this month, Waxman’s committee is expected to hold hearings on hedge funds, the breakdown of credit ratings agencies and the role of financial regulators.

In an ongoing to subplot to the hearings, several GOP committee members questioned why Waxman has yet to schedule a hearing on mortgage giants Fannie Mae and Freddie Mac.

After Monday’s hearing, Republican Reps. Christopher Shays of Connecticut, Tom Davis of Virginia and John Mica of Florida issued a joined statement calling for hearings on the matter.

“We need to keep the toxic twins, Fannie and Freddie, at the center of this hearing,” said Shays on Tuesday. “We can’t wait till Halloween to unmask these two monsters of corporate finance.”

Waxman said a request to hold hearings on Fannie and Freddie would be “pursued,” but did not offer any specifics.

A spokesperson for Waxman did not respond to a request for more information on the matter.

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Lehman Brothers took a series of direct hits Monday in the House Oversight and Government Reform Committee, repeatedly depicted by members as a greedy investment bank that took good care of its executives just days before it sought help from the federal government to avoid bankruptcy.

House Oversight and Government Reform Committee Chairman Henry A. Waxman (D-Calif.), calling the bank "a company in which there was no accountability for failure," was quick to chastise CEO Richard S. Fuld Jr.

Among other things, Waxman cited internal Lehman Brothers documents provided the committee in which a suggestion that top Lehman management should forgo bonuses was apparently dismissed.

"In other words, even as Mr. Fuld was pleading with [Treasury] Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation," Waxman said before Fuld appeared before his committee.

During his afternoon testimony, Fuld defended his actions, telling the panel that he did everything he could to save the company that had employed him since 1969 and that he took full responsibility for its failure.

“Not that anybody on this committee cares about this,” Fuld said, “but I wake up every single night thinking about what I could have done differently.”

Fuld said he would wonder why the federal government allowed his company to fail but rescued others “until the day they put me in the ground.”

Many committee members echoed familiar attacks throughout the day, with many Democrats highlighting the issue of executive compensation, while several Republicans questioned why Waxman was not holding hearings on the practices of mortgage giants Fannie Mae and Freddie Mac, now under direct government control.

At one point, Waxman asked Fuld if it were true he made some $480 million in compensation since 2000, asking: “Do you think it’s fair?”

In a tense exchange, Fuld said the actual figure was much smaller and that he took home closer to $60 million in cash compensation.

Waxman also did not rule out the possibility of hearings on Fannie and Freddie, saying committee staffers are in the process of reviewing documents related to the mortgage giants.

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In their more bullish moments, congressional leaders have speculated that the $700 billion bailout might turn out to be a profitable investment in the long run for the newly minted government asset managers.

They’d better be right, because Congress will need that money.

The tortuous path to passage for the bailout last week left a trail of expensive IOUs that will come due in the next Congress. Whether it’s for bridges, highways, levees, foreclosure help, bankruptcy or aid to debt-ridden states, lawmakers who flipped their votes are going to want to cash in next year.

“This is politics,” Rep. Joseph Knollenberg (R-Mich.) summed up to reporters after switching his vote.

Love it or hate it, this is how Washington still works. Reluctant lawmakers were not about to risk the populist backlash on the bailout vote without feeling like they could deliver the goods in the next Congress, under a new administration.

Rep. Elijah E. Cummings (D-Md.) flipped his vote not long after talking to Barack Obama, believing a President Obama would deliver a huge liberal priority: more lenient bankruptcy laws for people facing foreclosure. Rep. David Scott (D-Ga.), on the other hand, was rewarded with a colloquy on the House floor with Rep. Barney Frank (D-Mass.) in which the bailout architect and Financial Services Committee chairman stressed that he would work to implement changes Scott was seeking on behalf of black lawmakers concerned about foreclosures.

Scoring a floor colloquy is important, as it makes a promise public — and therefore easier to cash in — and is also something the member can point to in explaining a changed vote.

The influence of the Congressional Black Caucus cannot be underestimated in this vote. The bailout on Monday fell short by 12 votes. On Friday, 13 CBC members switched after being lobbied by Obama. Now, Democratic leadership — and potentially a President Obama — owe the caucus big time after this vote.

Scott also worked with Congressional Hispanic Caucus Chairman Joe Baca (D-Calif.) on foreclosure relief measures. Baca switched his vote, as did at least five other CHC members.

House GOP leaders, on the other hand, have little they can offer in the way of legislative favors, cursed as they are to be in the minority. On top of that, there seems to be little upside for conservative House members who were lobbied by John McCain, except to try to explain to angry constituents that they did the right thing in trying to save the American economy.

Thanks to a slate of GOP retirements, a number of seats will become available on the Ways and Means and Appropriations committees next session, which are enticing to members thinking about switching. GOP aides wouldn’t disclose the identity of any members who might have been offered better committee seats.

Opponents remain skeptical that there will be any payoff on the flip side.

“Nothing,” Rep. Brad Sherman (D-Calif.), a bailout opponent, said when asked what progressive Democrats who switched their votes might get. “This bill takes away money we might have used to help states, to help homeowners that Obama wants to help.”

Yet some IOUs are already in the process of being paid.

Immediately following the Friday bailout vote, the House took up an extension of unemployment benefits — a little sugar to help the day’s medicine go down.

The Senate plans to take up the unemployment extension in November in a lame-duck session, according to a Senate Democratic leadership aide.

The unemployment insurance expansion was never expected to pass in this session of Congress. It’s merely a preview of the more socially liberal tack that many Democratic lawmakers expect in the new Congress, which will likely have more Democrats in both chambers.

Statehouses will also be on the hunt for payback after governors from both parties lobbied hard on the bailout. The Republican and Democratic governors associations warn that states are facing major shortfalls in funding for everything from schools to highways, and members floated the need for infrastructure investment at the state level.

Obama has publicly assured Congress that he will push for an increase in such spending as a way to stimulate the economy, and it was only moments after President Bush signed the bailout into law that House Speaker Nancy Pelosi (D-Calif.) asked for the next phase of economic legislation: a $60 billion economic stimulus bill.

“The contrast to be drawn is between the first bailout bill and the second bailout bill,” explained Sarah Binder, a congressional expert at the Brookings Institution.

“What was striking about the first one was that it was all pain, no gain, and none of the sweeteners there to get people to vote for something in their own narrow parochial interests,” she said. “The second version conforms” to the usual way of doing business in Washington.

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MACON, Ga. — Jim Marshall was willing to risk his congressional career on a single vote.

Now he has 28 days to explain to voters why he backed the $700 billion bailout when so many voters in this sprawling central Georgia congressional district called the Democrat and told him to oppose it.

There are dozens of Jim Marshalls in Congress this week, back home explaining to agitated constituents why the financial rescue plan needed to happen. But Marshall’s political case is precarious — he won only 51 percent of the vote in 2006 in a district President Bush carried 61 percent to 39 percent.

He was so worried about the overwhelming opposition to the bailout that he quickly cut a campaign ad defending the vote.

“I just had to go with what I thought was best for the country and accept that if people were going to kick me out of office, so be it,” said Marshall, who is considered one of the most conservative Democrats in the House.

Marshall is locked in a tight race with Republican Rick Goddard, a retired major general in the U.S. Air Force who ran the biggest military installation in Georgia.

Goddard leaves no doubt that he will try to tip this issue in his favor.

“We have leaders who, in my opinion, are making reckless judgments,” Goddard said Monday during an interview in his campaign office in Warner Robins, Ga. “I just think it wasn’t thought through.”

But as the stock market continues to spiral downward and small businesses around the country find their credit frozen, Marshall and other vulnerable members of Congress are hoping that Main Street will accept the bailout vote as a necessary evil. Political analysts say it’s the GOP brand that continues to be damaged by the market meltdown, not Democrats.

“Marshall has handed Goddard and the Republicans a hot issue that they didn’t have a couple weeks ago,” said Nathan Gonzales, political editor for the Rothenberg Political Report. “But it’s still going to be a fight for Goddard. It looks like the bottom is falling out of Republican numbers nationwide.”

Very few truly vulnerable incumbents in either party backed the overwhelmingly unpopular rescue plan. In fact, they were advised by their campaign committees to oppose the bailout. Marshall at least has some political cover from his state’s senators — Republicans Saxby Chambliss and Johnny Isakson both voted for the bailout.

Yet the uncertainty is even more acute for those lawmakers who switched from no to yes, but few of those 58 lawmakers have tough reelection fights.

Michigan Republican Rep. Joseph Knollenberg is locked in a tough fight and switched his vote, but he believes that loans for automakers will help his constituents understand his decision. Other potentially vulnerable vote-switchers include Republican Reps. John R. Kuhl of New York, John B. Shadegg of Arizona and Jean Schmidt of Ohio, along with a pair of freshman Democrats from Arizona — Reps. Gabrielle Giffords and Harry E. Mitchell.

The bailout remains enormously unpopular with the public. Many offices estimated the early-round calls and e-mails were 99-1 against. But those numbers have evened significantly as the Dow Jones Industrial Average slumps lower and more Americans feel the pain of a tighter credit market.

Marshall’s district in central Georgia is just starting to feel those pangs.

“Credit is tight,” said Mike Bishop, reclining on the porch of Georgia Motors in Warner Robins, where he handles financing. “They seem to be grading people tougher and tougher.”

On Monday, Marshall addressed a group of business leaders at an office park near Robins Air Force Base, the biggest military installation in the state.

After the congressman explained his vote, one questioner asked if the massive outlay of federal cash would threaten future military contracts. Another asked why private business couldn’t bail itself out. And a white-haired man asked Marshall what to do about his 401(k). “I don’t know what to do,” Marshall replied. “Where do you go?”

“People are really angry about the bailout,” said Alan Gardner, a defense contractor who asked Marshall why private business couldn’t rescue itself. “I don’t know if the bailout was right or wrong, because I’m not in Washington. All I know is that I’ve lost 30 to 40 percent from my 401(k), and my wife and I are almost at retirement age.”

Gardner has no plans to punish Marshall for his vote in favor of the rescue package; instead, he said he’ll vote for whichever candidate he believes would make the best decisions moving forward.

Steve Hockett, a local defense contractor, summed up the feelings of many who showed up for Marshall’s speech Monday. “I hope you recognize, sir, that the American people have lost tremendous confidence in Congress,” Hockett said.

Goddard, Marshall’s opponent, is channeling the bailout critics.

After getting an earful from voters at the Georgia National Fair in Perry, Goddard believes voters are overwhelmingly opposed to the rescue package.

“The average Georgian doesn’t like tax dollars to be obligated like that,” Goddard said. Marshall “has to explain the rush to judgment.”

It’s easy, of course, for congressional challengers to come out against the bailout when they didn’t have to take the vote themselves. Goddard took some hits in the local media for waiting for almost a week to pan the bailout plan — after polling on the issue was released. He defended that delay on Monday, saying, “I’m not about to announce my position if I haven’t even seen what is in the bill.”

Marshall did not arrive at his vote decision lightly.

The week of the vote, he met with credit union executives and a principal of GE’s finance arm. During his session with the credit union executives, the congressman rained on their sunnier assessment of the economy. One joked as he left, “Well, now I’m depressed.”

In closed meetings with Democratic colleagues, Marshall laid his political career on the line.

“Look, many of you come from safe seats,” he told colleagues. “You can vote yes, even though this is far from perfect. I am prepared to give up my seat to make sure this is passed.”

After the congressman’s bold declaration was leaked to reporters covering the meeting, Marshall became a coveted interview for national media outlets such as National Public Radio.

Knowing it would be a close vote, Marshall decided to cast his in favor of the rescue package as early as possible.

So he voted and left, wondering as he walked back to his office in the Cannon House Office Building whether he would have to help his staff find jobs if he lost the election. Marshall said this vote was a tough decision but not as hard as the choice he made back in the 1960s to leave Princeton to join the Army infantry and go to Vietnam.

The day after casting his initial vote for the plan, Marshall went to the Washington office of Perkins Coie and shot an ad explaining that decision.

“I don’t like this rescue plan any better than you do,” Marshall says in the ad. “And I’m not interested in bailing out the responsible people who dragged us into this credit mess.

“But I’m not going to stand by and let this crisis undermine our economy and damage the financial future of everyone in America, their jobs, their savings, their dreams,” he said, before signing off: “You elected me to do what’s best for America, not what’s easy.”

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Treasury’s $700 billion rescue plan for the financial markets cleared Congress on Friday, after bouncing back to win approval from the same House which had rejected it only four days ago. 

The 263-171 vote caps a remarkable 14 days in which Congress found itself thrust onto a world financial stage and asked to cope with an unprecedented government intervention just a month before the November elections. 

It was precisely two weeks ago that Treasury Secretary Henry Paulson first outlined the administration’s plan to inject hundreds of billions into the markets by buying up troubled mortgage related assets to relieve a credit crunch threatening the larger U.S. economy. Leading economists remain divided about the wisdom of the policy; the huge cost triggered a populist anti-Wall Street fury among many taxpayers. But with unemployment rising and continued turmoil in equity and credit markets, even early critics concluded that the failure to act was more perilous to the American economy than following Paulson’s course. 

“The consequences of our not acting are overwhelming,” said House Minority Leader John A. Boehner (R-Ohio) in a final appeal to fellow conservatives who undercut passage Monday. “Let’s not kid ourselves. We’re in the middle of a recession. It’s going to be a rough ride, but it will be a whole lot rougher ride if we don’t pass this bill.” 

“On Monday, I cast a blue-collar vote for the American people, shook the foundations of Wall Street, demanding more accountability,” said Rep. Zach Wamp (R-Tenn.). “But today I’m going to cast a red-white-and-blue-collar vote, with my hand over my heart for this country because things are really bad and we don’t have any choice.” 

Rep. John Lewis (D-Ga.), a second “no” vote Monday, quickly followed in announcing his support, and after taking a sometimes “hands-off” approach Monday, Democrats showed a new determination to get the job done. “She’s not going home without a bill,” Rep. John Larson (D-Conn.) told Politico, pointing toward House Speaker Nancy Pelosi’s office. And behind-the-scenes Democratic presidential candidate Barack Obama played an influential role, calling individual members, such as Rep. Elijah E. Cummings (D-Md.), who announced Friday he would vote for the bill. 

Both parties came through strong in delivering vote switchers. Democrats increased their “yes” votes from 140 to 172, while Republicans increased their ranks from 65 to 91 on the prevailing side. There were 108 “no” votes on the Republican side while 63 Democrats voted against the legislation.

Monday’s 228-205 defeat in the House sent Wall Street into a tailspin, followed by a bipartisan effort to jump-start the process again in the Senate, which approved the plan 74-25 Wednesday night. Along the way, popular tax breaks and aid to rural schools were added to win support, at a cost of more than $105 billion next year. And to reassure middle-class families scared by bank failures, the bill temporarily raises federal insurance for savings deposits of up to $250,000 — compared with $100,000.

Going forward now, Treasury will have immediate authority to invest $250 billion and little trouble getting a second installment of $100 billion. But Paulson will be subjected to much greater oversight than he first proposed, and a future Congress could potentially deny any funding beyond the first $350 billion authorized in the legislation.

Taxpayers are promised a greater chance to gain some equity interest in the companies benefiting from the government aid. And new restrictions are imposed on executive pay and severance packages for those firms that sell more than $300 million in securities to the government.

Treasury official admit that it will take several weeks to begin to put the program into effect. And together with Federal Reserve Chairman Ben Bernanke, Paulson is exploring how best to use new auction mechanisms to not only guide the government’s investments but also shed new light on the real value of assets suppressed to “fire sale" prices after the collapse of the U.S. housing bubble.

As a practical matter, Treasury will also have to sell bonds to raise the money, meaning Paulson’s early investments may be limited to just $50 billion a month. And for this reason, the real future of the initiative could rest on whomever succeeds President Bush in January.

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Democratic leaders were bracing for defections on the vote allowing for debate on the financial-markets rescue plan because budget hawks in the Blue Dog Caucus were expected to vote against that procedural measure to protest the Senate’s inclusion of more than $100 billion in tax extensions and other legislative priorities. But Republicans were confident they could find the votes on their side of the aisle to offset those defections.

During early debate on the bill Friday morning, reluctant supporters of the massive economic intervention cited the rocky markets in urging their colleagues on the fence to reconsider votes against the package earlier in the week.

“We saw on Monday the consequences of doing nothing,” said California Rep. David Dreier, the ranking Republican on the Rules Committee. “Today we have a second chance.”

But opponents remained defiant.

“The fact is, we have taken two weeks, and we can take another week,” said Rep. Brad Sherman (D-Calif.), a leading critic of the bailout plan. “Defeating this bill today is not the last step. It is the first step to passing a good bill.”

Rep. Dennis J. Kucinich (D-Ohio) was more direct, saying, “The market may go up for the few days, but Democracy is going down here.”

Ohio Rep. Steven C. LaTourette, who was thought to be reconsidering his vote against the bailout package on Monday, tore into the revised package Friday morning because of a series of tax extensions added by the Senate.

The Ohio Republican offered an amendment Thursday night that would have reduced the cost of the rescue package to $250 billion, but members of the Rules Committee blocked it to ease passage.

“This was a bad bill we voted on Monday,” LaTourette said on the House floor. “It got a lot worse.”

Another opponent, Rep. Hilda Solis (D-Calif.), acknowledged Friday in the chamber that she was reconsidering her “no” vote.

The final vote is expected around noon.

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Barack Obama called Maryland Rep. Elijah Cummings on Tuesday with a promise: As president, he would revisit bankruptcy laws to give judges more leeway to prevent foreclosures.

Obama didn’t need to lay out a quid pro quo because the message was clear.

Cummings, who voted against the financial-markets bailout on Monday, told Obama he was “open” to changing his vote but wasn’t there yet.

"I have to look beyond [the bailout] to a rainbow called Obama," he said. "When you bring in the Obama factor, that’s very very important."

As the final high stakes vote on the bailout bill approaches Friday, Cummings is not alone among lawmakers who have found solid reasons to reconsider their vote. Whether it’s the "Obama factor," or the fact that billions in new tax incentives have been added to the bailout bill, it’s becoming clear that opposition is wilting to the $700 billion financial rescue plan just in time for a second House vote on Friday.

After a blitz of last-minute lobbying, Republicans and the Bush administration are hoping to get in the neighborhood of 80 to 85 GOP votes on the bailout bill after garnering only 65 on Monday. And Democrats are hoping to build slightly on the 140 lawmakers who supported the bill earlier this week.

The outcome still hangs on the prerogatives of a dozen or so wavering lawmakers in both parties, but congressional leaders are “cautiously optimistic” about the outcome Friday even after watching their rank and file sink the initial bill on Monday in a public revolt that shook financial markets around the world.

Thursday brought another round of public – and private – reversals, with Georgia Rep. John Lewis, a prominent member of the Congressional Black Caucus, telling colleagues at a closed-door meeting that he would support the bailout plan, according to people present – Lewis wouldn’t confirm as he left the meeting, but said, “Just watch the board.”

Republicans, from retiring Minnesota Rep. Jim Ramstad to Tennessee Rep. Zach Wamp, and Democrats, from Nevada Rep. Shelley Berkley to Missouri Rep. Emanuel Cleaver, all declared on Thursday they would support the current bill, according to various news sources.

It’s important to note that nothing is certain until the gavel falls Friday, so none of these public or private declaration means a thing until that point.

“We’re still looking at it,” said Rep. Pete Hoekstra, another lawmaker rethinking his vote.

The Michigan Republican is more attracted to the Senate package than the initial bill because it would raise the amount of money the Federal Deposit Insurance Corp. insures, from $100,000 to $250,000. Hoekstra told Vice President Dick Cheney on Monday to make that change and is pleased to see it has been included.

Hoekstra is also more open to the bailout package now that SEC Chairman Chris Cox agreed to give companies more leeway in pricing their assets.

But he is upset about “all the pork in the bill,” referring to a number of tax extensions in the legislation tailored to specific industries, like a break for wooden arrows that has been mocked by watchdog groups sifting through the 450-page Senate version of the bill.

Obama, the White House and business leaders from across the country have all bombarded Capitol Hill with phone calls, e-mails and personal visits since the House sank an initial bailout bill Monday. President Bush even gave business lobbyists a list of targeted lawmakers to contact before Friday’s vote as the key constituencies emerge.

And time is increasingly important, with the Dow Jones Industrial Average dropping another 348 points on Thursday. As one GOP aide suggested, the House either passes the bill this week or it never gets done.

With Lewis and Cleaver changing their votes and others, like Cummings, now on the fence, Democrats and Republicans alike were predicting significant movement from the Congressional Black Caucus.

One member pointed to Reps. G.K. Butterfield of North Carolina, Jesse Jackson, Jr. of Illinois and David Scott of Georgia. Scott has been working with Financial Services Chairman Barney Frank (D-Mass.) and other leaders to address the CBC concerns.

One big question mark remains Democratic budget hawks in the Blue Dog Caucus, who are “uniformly upset” with the Senate for attaching the rescue package to a series of popular tax extensions that add more than $100 billion to the overall cost of the bill.

But so far, none of the Blue Dogs have changed from "yes" to "no."

Emerging from a meeting with a Blue Dogs on Thursday afternoon, Majority Leader Steny H. Hoyer (D-Md.) said, “Nobody (in the room) announced they were going to be opposed.”

But Tennessee Rep. John Tanner said, “The Blue Dogs are uniformly upset about what the Senate did without paying for extensions.” And others leaving the session backed up his claim, but most of them acknowledge that they don’t have a choice but to accept the new package.

“We don’t have any alternative,” Tennessee Rep. Jim Cooper said after emerging from a meeting with the Blue Dogs. “What choice to do we have?”

Cooper suggested the Thursday was “part of the therapy” after the Senate added more than $100 billion to the deficit. “You have to vent.”

There was talk Thursday those lawmakers would cast a protest vote against the rule allowing for debate on the bailout, but nothing was confirmed.

On the other side of the aisle, conservatives complained after Monday’s vote that party leaders never reached out to them, so Minority Whip Roy Blunt (Mo.) attended a Thursday afternoon meeting of the Republican Study Committee.

Blunt listened to their concerns, but he wasn’t expected to find many converts. Leaving the meeting, Texas Rep. Joe Barton predicted the reversals among his GOP colleagues would “probably be in the single digits.” Wisconsin Rep. Paul Ryan, a well-respected conservative who backs the measure, said “not a lot” of his colleagues in the Republican Study Committee would switch their votes.

As RSC members left the session for an evening vote, protestors from the liberal anti-war group Code Pink encouraged the conservative Republicans to “stay strong” in their opposition – the ultimate sign that this debate has produced some very strange bedfellows.

Republican leaders, who are still reeling from a humiliating defeat on Monday, sought to limit debate on the rescue package on Friday in to prevent opposition from snowballing.

GOP leadership staff petitioned Democrats on Thursday to limit debate on the bill to an hour after allowing lawmakers three hours to debate the plan on Monday. This is an extraordinary turnabout for House Republicans, who have bitterly complained in the past that Democrats aren’t allowing open debate and a fair amendment process.

On the bailout, Republicans would rather just line up their people and have a quick vote, it seems, rather than letting the debate get out of control again.

Opponents don’t have the momentum, but they are still making a strong case in the waning hours. Many offered alternatives, including Ohio Rep. Steven C. LaTourette who wants to reduce the total cost of the measure by $450 billion to $250 billion.

As expected, the Rules Committee blocked all 15 amendments offered Thursday night, so the bill will come to the floor unaltered after the Senate approved it, 74-25, in a dramatic vote the previous evening.

Even as leaders work together whipping votes, though, there’s still a significant level of mistrust.

Democratic leaders have made the case all week that Republicans are responsible for corralling the necessary votes – all while emphasizing the bipartisan spirit of this legislation.

The debate over who is responsible for this finanical crisis is bound to become more partisan once lawmakers leave town.

Democrats have already announced a new round of hearings to discover the root causes of this financial meltdown, including a session with former Federal Reserve Chairman Alan Greenspan, insuring that economic concerns will be a focus whatever the outcome on Friday.

“This isn’t our last act,” House Speaker Nancy Pelosi (D-Calif.) told reporters on Thursday. “We’ll have plenty of time to do more.”

-Glenn Thrush, Daniel W. Reilly, John Bresnahan and Ryan Grim contributed to this story.

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A federal judge today refused to throw out corruption charges against Sen. Ted Stevens (R-Alaska), but he said the Justice Dept. prosecutors failed to disclose all the information they had in their possession that could prove Stevens’ innocence.

Judge Emmet Sullivan, in a scathing criticism, also said he had “no confidence” in the Justice Department’s willingness to turn over all exculpatory material it had that would clear Stevens. The judge ordered prosecutors to make any such information available immediately, and he scheduled a hearing for Monday morning to make sure prosecutors comply.

"How does the court have any confidence that the Public Integrity Section [of the Justice Department] has any integrity?" Judge Sullivan asked. DOJ’s Public Integrity Section prosecutes corruption cases against government officials, including this case.

The lead prosecutor in the Stevens’ trial, Brenda Morris, then told Judge Sullivan that she and the other prosecutors had “self reported” their failure to disclose all material to the Office of Professional Responsibility within the Justice Dept. This office monitors whether Justice Dept. employees live up to legal and ethical standards.

Judge Sullivan’s ruling, coming late on Thursday afternoon, capped a hectic day of legal maneuvering in the week-old trial. While the judge’s denial of a dismissal was disappointing to the Stevens camp, the prosecutor’s fumble over evidence was perhaps the most positive development for Stevens since he went on trial.

Stevens lawyer Robert Cary on Thursday claimed the trial is “broken and can’t be fixed.” But the trial will continue into next week.

Stevens has been charged with failing to disclose more than $250,000 in improper gifts on his annual financial disclosure form, gifts he allegedly received from Bill Allen, former CEO of Alaska oil services company VECO Corp., and others.

Prosecutors claim that Stevens received $188,000 in renovation work on his home in Girdwood, Alaska, without paying for it. They charge that Stevens, in turn, took numerous official actions to benefit Allen and VECO.

Stevens has vehemently denied the charges, and his attorneys claim that he paid every bill he received from work on the Girdwood home, which came to more than $160,000. Stevens’ attorneys say that Allen, on his own, decided not to send other bills to Stevens. Allen has pleaded guilty to bribing two Alaska state legislators and is awaiting sentencing.

At issue in today’s court fight was what Allen told an FBI agent who interviewed him back in August 2006. According to the FBI’s report of the interview, the FBI agent stated that “Allen recalled that Ted Stevens wanted to pay for everything he got.” That statement by Allen was not disclosed until very late on Tuesday night, and could become a critical piece of Stevens’ defense.

With Allen on the stand again on Thursday testifying, Stevens attorney Brendan Sullivan angrily charged that prosecutors had purposely kept this statement from the Stevens defense team. If true, this could be a violation of federal evidence rules that require prosecutors to turn over to the accused all exculpatory evidence, including information that may weaken the government’s case.

But Morris, the lead federal prosecutor, countered that it was “simple human error” and not prosecutorial misconduct that caused the oversight.

Judge Sullivan suspended the trial, and he demanded that both sides file motions as to why he should not dismiss the case, or declare a mistrial.

In an afternoon session, Stevens’ attorneys once again asked for the case against their client to be dismissed.

“I’m representing to the court that the integrity of the proceedings has been breached,” said Brendan Sullivan, who was visibly furious at the revelation that the government had withheld the key statement from Allen. The high-powered defense attorney, who once defended Oliver North, argued that it would have changed his approach to defending Stevens.

Brendan Sullivan called Allen “an absolute liar” regarding a statement that Allen had made suggesting that Stevens was “covering his ass” when he asked Allen for all the bills from the home renovation.

Cary pointed to an alleged “pattern of conduct” by prosecutors in failing to turn over information favorable to the defense. Cary noted that Rocky Williams, a Veco Corp. employee who served as foreman of the Girdwood home project, was originally scheduled to be a prosecution witness against Stevens, and the Justice Dept. had brought him to Washington to prepare him to appear.

Williams, however, was quietly flown back to Alaska by the Department of Justice before he could be called to testify, a fact not disclosed to defense attorneys, who were seeking to exercise their right to interview him before he testified. When defense attorneys interviewed Williams, he said that he had not spent as much time on the Girdwood remodeling as prosecutors suggested.

Seeking to prevent a potentially huge embarrassment for the Justice Department, Morris argued the missteps by her team “did not materially alter” the defense’s claim that Stevens’ paid all the bills he knew about on the home remodeling.

While acknowledging that the Justice Department had likely violated federal rules on disclosing exculpatory evidence, Judge Sullivan eventually denied the dismissal or mistrial motion from Stevens’ attorneys.

But he may allow Stevens’ attorneys make fresh opening arguments in the case, which will begin anew Monday morning. Judge Sullivan also said that he may instruct the jury that prosecutors failed to turn over everything they knew about the case.

Either way, both those options would bolster Stevens’ chances of winning acquittal in what was already a tough case for prosecutors.

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The Republican Party may be deeply fractured over the bailout, but supporters and opponents of the measure agree on one thing: an obscure Carter administration policymaker named Bill Isaac helped kill the bill on Monday.

Now, with a second shot at the rescue package in the House, Republicans are battling some of their members over whether they should keep listening to Isaac, a former Federal Deposit Insurance Corp. appointee who has become the brains behind bailout opposition on the Hill.

It’s not clear if the Senate’s resounding 74-25 vote will undermine Isaac, a Sarasota, Fla. financial consultant, who will be back in Washington today lobbying House members again.

One lawmaker after another has cited Isaac’s economic arguments – Democrats and Republicans both — against the financial rescue package, granting unheard of influence to a consultant who has been out of the Washington political game for two decades. On Wednesday, according to a GOP aide and confirmed by Isaac, he spent an hour and a half on the phone with White House representatives. The aide said Isaac spent the time explaining to them the flaws in the program; Isaac wouldn’t comment on the substance of the conversation.

As the historic debate has unfolded, he’s gone from lobbying members to lobbying on their behalf. Some e-mails sent to members by Republican leadership, making the case for the package, have been returned by Isaac instead.

Isaac, who opposes the current deal, flies back to Washington Thursday morning to continue his consultations with House skeptics.

Some of the ideas that made it into the Senate bill came directly from Isaac. He called for Congress to remove the mark-to-market accounting rules — which became a rallying cry for House Republicans – and also called for the FDIC to increase the amount it insured. The FDIC change has already been put into the Senate bill, and the Securities and Exchange Commission has decided to loosen its accounting rules regarding market values for certain mortgage backed assets.

“That guy is more responsible for bringing this thing down than anybody else. He whipped them up into a frenzy,” said a frustrated House GOP leadership aide, who argued that Isaac’s early-‘80s experience may have been impressive then, but questioned whether it transferred to today’s financial system.

“Joe Gibbs was a great coach,” he said. “In the 1980s.”

The pushback against Isaac includes elements of the right traditionally allied with the Republican Study Committee, the most vocal opponents of the bailout. David Jones is a conservative economist at the Heritage Foundation. “I have great respect for Bill Isaac. He did wonderful work at the FDIC. But I think this is the wrong solution,” he said of Isaac’s prescriptions. He’s been pressing conservative members to reconsider.

Isaac’s not backing down. “If I am making enemies, I must be doing something right,” he said in an e-mail to Politico.

Rep. Darrell Issa (R-Calif.), a leading opponent of the bill, invited Isaac to Washington after being told about him by a friend. He gives Isaac credit for killing the bill.

“As more and more people got educated as to [financial] tools and how they could be used and why they’d be better, I think it surprised Republican leaders, because they had members that had the ammunition to say why they couldn’t support this one at taxpayers’ expense,” said Issa.

After huddling with the RSC, Isaac spoke to a group of skeptical Democrats Sunday and then set up camp outside the Democratic Caucus meeting. Along with liberal economist Dean Baker and another economist, James K. Galbraith, the trio engaged Democrats coming in and out of the meeting. Following the caucus meeting, they met with members who wanted to stay and hear them out.

Baker said that Isaac was persuasive even among the Democrats that he lobbied. “People were desperately looking for a way to keep the banks whole without using money,” Baker said.

To that end, Isaac proposed allowing the FDIC to issue “net worth certificates” to distressed financial institutions in lieu of capital. “Essentially, this would duplicate the kind of mistakes that policymakers”—such as Isaac—“made in the ‘80s that helped to make the situation so much worse,” said Jones. The institutions still failed, he said, but failed later and at greater cost to the taxpayer.

Jones said that he’s talked to a sizeable number of House Republicans and many had been swayed by the net-worth idea. “They were fairly moved because this looks like a cheap, easy solution that has relatively low political downside,” he said. “The only downside is it doesn’t work.”

Reps. Brad Sherman (D-Calif.) and Peter DeFazio (D-Ore.) picked up on some Isaacs ideas. Sherman and DeFazio led the Democratic effort against the bill and the net-worth-certificate plan was included in the progressive alternative – another instance of left-right unity fostered by Isaac.

Sherman said that he offered to pay for Isaac’s plane-fare north and has invited him back. “It’s one of the best things I’ve done with my money,” he said.

Between the skeptical Democrats and free market Republicans, Isaac was quickly consulting with a critical mass of opponents.

Acting as if he was a lobbyist on the bill, Isaac remained in the Capitol until past midnight Sunday night and returned again Monday morning before the vote. He has remained in contact with members

When Isaac comes calling Thursday he’ll spend the afternoon in Issa’s office. This time, though, he’ll be greeted with some pushback from Republican leaders trying to push the package through.

Isaac has been politically active yet bipartisan, given $1,000 each this cycle to Senate Banking Chairman Chris Dodd (D-Conn.), Barney Frank (D-Mass.) and independent presidential candidate Ralph Nader. He gave $2,000 to Rep. Vernon Buchanan (R-Fla.) and $1,000 to Rep. Connie Mack (R-Fla.), both no votes. He’s also given $2,300 to John McCain.

Some have called his economic judgment into question due to predictions he’s made that have turned out wrong.

“I believe that [the housing market’s] already showing signs of leveling out. I believe that over the rest of 2007 and 2008 we’ll be seeing the market stabilize and improve,” he told the trade publication Mortgage Banking in 2007. “[G]enerally as a nation as a whole, I don’t have any concerns.”

Isaac said that the comments would have proven correct if the Securities Exchange Commission had followed his advice.

“I thought then that the markets would stabilize, and I believe they would have if the SEC had not crushed the financial system by wiping out more than $500 billion of capital through its senseless marking to market on mortgage backed securities,” Isaac said. “This $500 billion of paper write offs has diminished bank lending capacity by $5 trillion and has wiped out a great number of the leading financial companies in the United States.”

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