A Democratic pushback to the $700 billion Wall Street bailout plan proposed by the Bush administration is underway. At a Senate banking committee hearing on Monday morning, Senator Jon Tester, a Democrat and self-described "dirt farmer" from Montana, asked Treasury Secretary Hank Paulson and Federal Reserve chief Ben Bernanke why members of Congress only had one week to determine whether to spend $700 billion or watch the financial system "go down the pipes?" In other words, why the rush? Bernanke said the bailout was necessary to prevent a shutdown in credit that would lead to more unemployment, more foreclosures, and an economic contraction. "Lenders have to be able to lend," Paulson remarked.

But there are a lot of details in the plan to review and consider. And while the hearing was going on, over on the House side, a group of progressive- and populist-minded Democrats were trying to start a quasi-rebellion. On Monday afternoon, Representative Brad Sherman of California, who serves on the financial services committee, convened a meeting with eight other Democrats, and the group on Tuesday morning released a letter to House Speaker Nancy Pelosi questioning whether the Paulson plan has to be approved by week's end and demanding at least eleven major changes in the proposal.

Here's that letter:

[Read more]

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A CEO in India has been beaten to death by a mob of fired workers. Yikes.

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The idea of capping executive pay on Wall Street is really catching on. You would think the strongest measure on that front would be found in the version of the bailout proposed by Democrat Chris Dodd. Actually, it's coming from... John McCain?

Dodd is proposing to penalize executives who take "inappropriate or excessive" risks. The executive compensation and severance packages could be reduced if that is "in the public interest," the proposal says. It would also force executives to give back profits they earned that were based on company accounting measures that are later found to be inaccurate.

Republican presidential candidate John McCain, who has supported giving shareholders a bigger say in executive compensation in the past, said today that taxpayers shouldn't foot the bill for "golden parachutes" for officers of companies that have crumbled in upheaval on Wall Street.

"The senior executives of any firm that is bailed out by Treasury should not be making more than the highest paid government official," McCain said at a campaign event in Scranton, Pennsylvania.

The president is the highest paid federal official, with a salary of $400,000 a year.

McCain is really, really committed to this new populist, foe-of-Wall Street posture. And, for what it's worth, take a second to reflect on how quickly and how fundamentally the economic meltdown has changed the political landscape in this country — the two parties are competing to see who can twist the screws tighter on Wall Street fat cats. Did you think even six months ago that such a scenario was possible in this country?

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Politico (totally "in the tank," by the way) has a copy of Chris Dodd's alternative to Treasury Secretary Paulson's bailout plan for Wall Street. While Dodd provides the Treasury Department with the authority it needs to buy up all of Wall Streets "distressed assets" (that's the point of the $700 million), it comes with a bunch of provisions that Paulson neglected. Basically, Dodd is trying to seize this opportunity to achieve progressive goals that would not be manageable in a more market-, deregulation-, and Wall Street-friendly environment.

Authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered a poison pill in a housing bill that passed Congress earlier this summer, but it has gained much more currency now that Washington wants to bail out Wall Street.

A provision that would require the Treasury to take a 65 percent portion of 20 percent any profits [sic] it makes from the newly purchased assets and put it into the federal government's HOPE program, an affordable housing program.

An oversight board that not only includes the chairman of the Federal Reserve and the SEC, but congressionally appointed, non-governmental officials.

Limits on executive compensation. This is a major stumbling point for Paulson in his negotiations with Congress, but cracking down on Wall Street executive salaries will be a major selling point for lawmakers. Dodd and Frank have put in place what's known as a "claw back" provision aimed at revoking compensation that executives received based on fraudulent claims.

An independent inspector general to investigate the Treasury asset program, appointed by the president.

Democrats control the Senate. If they want to, they can play hardball. They can tell the Republicans, "We insist that all or most of these provisions pass. If you block them, your buddies on Wall Street burn. And we tar you as playing obstructionist games during a time of national crisis." The Republicans can respond by holding up the bill and then arguing in the press that any inaction in a Democratic-controlled Congress is the fault of the Democrats. But with the public likely in favor of the common sense measures included in the Dodd bill, that would place the GOP in a very tight spot.

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