Quotes of the Day

Around 12:30 a.m. Sunday morning, House Speaker Nancy Pelosi announced the fundamentals of a deal between House and Senate leaders and Treasury Secretary Henry Paulson to stave off financial collapse on Wall Street after a week of frenzied Hill wrangling. Declaring the $700 billion bailout plan "a way to insulate Main Street and everyday Americans from the crisis on Wall Street," Pelosi unveiled the deal with House Republican Whip Roy Blunt and the ranking Republican from the Senate banking committee, Judd Gregg, as well as Paulson and other Democratic leaders.

It remained unclear, however, how rebellious House Republicans would receive the deal. GOP Presidential candidate John McCain said Sunday morning that he hoped to support the package once he saw the details, and he consulted by telephone with Paulson throughout the Saturday evening negotiations, as did Democrat Barack Obama. Obama released a statement early Sunday calling the deal necessary, but also, "the culmination of a sorry period in our history."

For all the drama over the last week — John McCain's theatrical but ultimately unhelpful return to Washington, the anti-Socialist rants of House Republicans, the political maneuvering by Nancy Pelosi — the deal comes as something of an anticlimax. The market had already priced in the deal all last week, ignoring the Hill's histrionics, and Paulson and Bush were always adamant they were going to get a deal. So what did all the drama actually produce?

Looked at from a distance, it was clear the bullet-headed dealmaker Paulson was going to squeeze what he wanted out of Congress. Over the last six months, with the help of Tim Geithner at the New York Federal Reserve Bank and Ben Bernanke at the Federal Reserve, he has driven Bear Stearns into the arms of J. P. Morgan at a fire sale price; he has forced the board of Fannie Mae to enable a government takeover even though it meant devastation for shareholders; he has stared down Richard Fuld at Lehman Brothers, who thought he could bluff Paulson into saving the firm; and he has negotiated brutal terms with AIG to save them from outright failure with a government bailout.

In comparison, wrangling a few politically terrified congressmen should have been child's play. The bill tracks the basics of what he asked for over a week ago. He gets $700 billion, albeit in pieces over time, and he gets to decide exactly how he wants to purge the market of the bad loans that are paralyzing the financial system.

That said, judging from details provided by staffers and reports in the media, Congress did make a difference. To the three-page outline Paulson delivered over a week ago, the Hill added provisions to help American homeowners avoid foreclosure by reducing principals or interest rates and giving people more time to pay back their mortgage. Congress also got a guarantee that taxpayers will get their $700 billion back, and ensured Congressional oversight and transparency of Paulson's transactions. Politically, Congress covered itself somewhat by mandating a limit on executive pay for firms that tap the government's $700 billion.

One detail that will be key to moving the deal forward remains muddy. Democratic aides say that at midnight last night, Pelosi suggested that the bailout deal guarantee that taxpayers recoup from financial firms any part of the $700 billion not paid back through the Treasury Department's reselling of the bad loans. "That was the last remaining issue and it was only decided after the Speaker's direct involvement," said one Democratic aide. How financial firms would be forced to pick up that tab, however, is not clear.

That is only one element of the tricky undertaking that begins now for Paulson. For all the equity markets' sanguine response to the Hill, the credit markets are still seizing up. The process by which Paulson will actually use the $700 billion to buy the bad loans remains more than opaque. Sources familiar with his plans say he intends to structure some kind of reverse auction, where holders of the loans compete for the pool of money, pricing their loans as low as they can to still survive. But a slew of academic experts in auction theory have yet to determine exactly how to make that work. Nor is it a guarantee that some of the worst run banks won't fail.

And the political fallout is also yet to be determined. Obama appears to have played his natural advantage on this issue well, staying far enough out of the spotlight to avoid owning the issue, but coolly providing guidelines and participating as needed in the negotiations. John McCain, has bigger problems on his hands. The bad economy necessarily works against the incumbent party and his self-proclaimed weakness on financial matters, combined with his considerable wealth, may be as great a vulnerability.

In a moment of particular clarity during Friday night's debate with Obama, McCain put it aptly. "This isn't the beginning of the end of this crisis," he said. "This is the end of the beginning." However the economy affects McCain's chances for the White House, the pain on Main Street has only just begun.

• Massimo Calabresi