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What Should A New Plan Look Like?

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Congressional leaders scrambled Tuesday to find out what changes are needed to sell the failed $700 billion financial system bailout to rank-and-file members.

We spoke to Rep. Joe Barton (R-TX) who voted “no” to the current plan. He tells us that he advocates starting with a clean sheet of paper and then putting together a bill that “we know will pass before we put it up on the floor.”

"If they put a re-warmed version of the Paulson plan I’m going to vote no again,” says Barton. “But if they use some fresh thinking then it could pass."

Barton wants to see two major changes. "I would do two things. Make the insurance program mandatory and address the trillion and a half debt ceiling increase which I think is unconscionable,” he tells us. When that happens he thinks the bailout will pass.

Raising FDIC Limits

Meanwhile, John McCain and Barack Obama offered long-distance help from the campaign trail. They announced separately that they support a plan that some House Republicans had pushed earlier: raising the federal deposit insurance limit from $100,000 to $250,000.

The aim of this change would be to reassure nervous Americans -- and hence their elected representatives at the Capitol -- that the legislation would shore up the faltering economy.

Mark To Market

Another possible change to the bill would modify "mark to market" accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

Liberal Democrats who opposed the bill are suggesting other changes. Their ideas include extending unemployment insurance and banning some forms of "short selling," in which investors bet that a stock's value will drop.

In its current form the bailout would:
- Authorize the government to buy distressed debt from private firms,
- Limit pay packages for executives of firms that seek assistance,
- Allow taxpayers to profit if the bailout plan works.

Many conservative Republicans want to see alternate proposals in which:

- Wall Street and not tax payers fund the bailout,
- Private capital and not tax dollars are injected into the financial markets,
- Immediate transparency, oversight and market reform are implemented.

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The bill's defeat in the jaw-dropping House floor vote came despite furious personal lobbying by President Bush and support from House leaders of both parties. But the legislation was highly unpopular with the public, ideological groups on the left and the right organized against it, and Bush no longer wielded the influence to leverage tough votes.

Even pressure in favor of the bill from some of the biggest special interests in Washington, including the U.S. Chamber of Commerce and the National Association of Realtors, could not sway enough votes.

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