Cantor plays key role in bailout discussions

By Neil H. Simon, Media General News Service
Published: September 26, 2008

WASHINGTON — With Congress working feverishly to agree on a massive economic bailout proposal, Republican Rep. Eric I. Cantor found himself in a key role drafting alternatives to the $700 billion White House plan.

House Republican Leader John A. Boehner of Ohio tapped the Virginia lawmaker midweek to lead a nine-member Republican working group on the issue.

Cantor held several meetings Thursday and Friday, which resulted in what he labeled a “common-sense plan” to bail out billions of dollars in bad debts on Wall Street without sending the government spiraling into more debt than necessary.

At the crux of Cantor’s plan is having the government insure mortgage-backed securities to be sold in the private sector, rather than be bought outright by the government as recommended by Treasury Secretary Henry M. Paulson Jr.

“We’re trying to be constructive and trying to offer a solution and protect the taxpayers,“ said Cantor, who has also spent much of the last few days talking or meeting with Republican presidential candidate John McCain, White House negotiators, and fellow House members.

Cantor said he’s had talks with every White House negotiator except for President Bush regarding the bailout.

“They obviously prefer their plan,“ Cantor said.

Paulson and others have said the insurance program will not work, arguing that people still will not want to buy the securities.

“Of course it works,“ Cantor said. “We can take the classes of assets that are predictable and insure them.“

For the higher-risk securities, Cantor said, the government bailout will still be necessary.

Cantor’s plan appears to have wide support among House Republicans.

“The Republican caucus is about as united as I’ve ever seen it,“ said Rep. J. Randy Forbes, R-4th, who credits Cantor’s group with slowing down any rush to use taxpayer money to bail out Wall Street firms of their bad debts.

Administration officials have warned swift action is needed on the bailout to prevent a more widespread calamity in the financial markets not seen since the Great Depression.

But fiscal conservatives have been wary of such a huge investment of taxpayer money to rescue Wall Street firms from a housing and credit crisis many see as a product of their own making.

Rep. Virgil H. Goode Jr., R-5th, said the Cantor outline was “far superior to the Paulson position of having the taxpayers bear the brunt of the burden.“

Contact Neil H. Simon at (202) 662-7669 or