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Obama Says Bailout Bill Should Not Include Bankruptcy Reform

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The progressive wing of the House Democratic caucus reacted angrily Thursday evening to the news that Barack Obama opposes attempts to add bankruptcy reform to the Wall Street bailout bill.

A large block of Democrats is seeking to add a provision to the $700 billion measure that would empower bankruptcy judges to help homeowners avoid foreclosure. The bankruptcy proposal and a separate effort to place caps on executive pay in firms that benefit from new government subsidies are two key, but controversial, provisions that Democrats have pressed for in recent days. They legislators have two aims: a) to help voters who are taking a beating in the current economic downturn; and b) to address public anger over what many of their constituents see as the transfer of taxpayer dollars to mismanaged companies.

Most congressional Democrats learned of Obama's opposition to the addition of the bankruptcy provisions at a closed meeting Thursday evening, after the White House meeting attended by House and Senate leaders of both parties, President Bush, and Obama and John McCain.

In fact, however, Obama had publicly disclosed his opposition 24 hours earlier, at a Wednesday press briefing in Clearwater, Fla., before he left for Washington.

Although very few media accounts noted his Wednesday stand, he told reporters in Clearwater that "issues like bankruptcy reform, which are very important to Democrats, is probably something that we shouldn't try to do in this piece of legislation." In addition, he said that his own proposed economic stimulus program "is not necessarily something that we should have in this package."

At the session Thursday night with the Democratic Caucus, House Speaker Nancy Pelosi, according to sources, told members that Obama is "our messenger," suggesting that he should call the shots. Her stand did not sit well with members seeking to add amendments to the legislation.

In Clearwater, Obama said, "Every American has a stake in solving this crisis and saving our financial system from collapse, because, if we don't act soon, then people's jobs, people's savings, the economic security of millions of Americans will be put at risk. So, the clock is ticking."

Because of the emergency situation, Obama argued that "what we shouldn't do is to try to get everything done in this package. What we should be doing is following the clear principles, that taxpayers are protected, that we have oversight, that taxpayers are going to get their money back, and that the housing crisis is going to be dealt with as well."