WASHINGTON – Under strong attack from Republicans, House Speaker Nancy Pelosi accused the CIA and Bush administration of misleading her about waterboarding detainees in the war on terror and sharply rebutted claims she was complicit in its use.

“To the contrary . . . we were told explicitly that waterboarding was not being used,” she told reporters, referring to a formal CIA briefing she received in the fall of 2002.

Pelosi said she subsequently learned that other lawmakers were told several months later by the CIA about the use of waterboarding.

“I wasn’t briefed, I was informed that somebody else had been briefed about it,” she said.

The House’s top Democrat made her comments at a news conference where she was peppered with questions about her knowledge of a technique she and others have called torture. Republicans have insisted in recent weeks that she and other Democrats knew waterboarding was in use, but made no attempt to protest.

Pelosi renewed her call for a so-called truth commission to investigate the events in the Bush administration that led to the use of waterboarding and other harsh interrogation techniques. While President Barack Obama has banned waterboarding, calling it torture, he has been notably cool toward an independent inquiry that might distract attention from his domestic agenda.

Senate Majority Leader Harry Reid, D-Nev., also has expressed opposition, as have congressional Republicans.

Pelosi was particularly harsh in describing the CIA.

“They mislead us all the time,” she said. And when a reporter asked whether the agency lied, she did not disagree.

She also suggested that the current Republican criticism marked an attempt to divert attention from the Bush administration’s actions.

“They misrepresented every step of the way, and they don’t want that focus on them, so they try to turn the focus on us,” she said.

Pelosi contended that Democrats did what they could to stop the use of waterboarding. The senior Democrat on the Intelligence Committee, who received the 2003 briefing on the practice, sent the CIA a formal letter of protest, she said.

But Pelosi defended her own lack of action on the issue, saying her focus at the time was on wresting congressional control from Republicans so her party could change course.

“No letter could change the policy. It was clear we had to change the leadership in Congress and in the White House. That was my job – the Congress part,” Pelosi said.

Obama acknowledges need to get lenders to buy into lowering teetering mortgages

A foreclosure sign sits outside a home for sale in Phoenix on Tuesday. With one of the highest foreclosure rates in the country, Arizona made a fitting backdrop for President Obama's new housing program.

WASHINGTON – The same mortgage lenders who candidate Barack Obama accused last year of causing the housing mess would get a windfall from President Obama’s government under his foreclosure rescue program.

The $75 billion plan announced Wednesday has the potential to be far more effective than past federal efforts to help struggling homeowners lower their mortgage payments and stay in their homes. But for that to happen, investors in complex mortgage securities have to agree to participate, something the government has so far failed miserably to persuade them to do.

That’s where the goodies for the much-maligned industry come in.

Companies would get $1,000 for agreeing to give a strapped homeowner a lower monthly payment instead of foreclosing, more if the borrower hasn’t yet fallen behind on what they owe. They can get up to another $3,000 over the next three years. And they get government insurance to cover part of the money they might lose if the homeowner ultimately defaults on the house anyway.

In October at Reno, Nev., Obama vowed, “I won’t let banks and lenders off the hook when it was their greed and irresponsibility that got us into this mess.”

But the outlines of his plan were an acknowledgment that he will need cooperation from firms that collect mortgage payments, known as loan servicers, if he intends to reach his goal of preventing up to 9 million foreclosures.

“The truth is that at the end of the day, loan modification remains voluntary, so the servicers need to see it as sufficient incentive to participate,” said Andrew Jakabovics of the Center for American Progress, who has worked with Obama’s team on housing issues.

Still, Jakabovics called some of the payments an “unnecessary windfall” that is “overly generous,” particularly since avoiding a costly foreclosure is a financial imperative for mortgage servicers anyway.

“You still have the very serious question of what kind of incentives you’re providing for what’s essentially bad behavior,” said David C. John, an analyst at the conservative Heritage Foundation.

Even tough mortgage industry critics concede, however, that such enticements are necessary to get companies to step up and help homeowners, given the legal and financial challenges that modifying home loans can pose.

“It’s just what needs to happen, wherever the blame lies” for the housing mess, said Debbie Goldstein, the executive vice president of the Center for Responsible Lending, a consumer group.

The plan also abandons an aspect of the Democratic-written foreclosure rescue program enacted last year that proved anathema to mortgage holders: requiring that they take a loss up front before the government would help renegotiate a loan. The program failed miserably, helping fewer than 40 homeowners compared to the 400,000 promised.

Under Obama’s new plan, mortgage holders only have to take a hit on the interest payments they receive each month, and would in most cases be made whole by the government for the value of their loans.

“It’s a veritable garden full of carrots,” said Howard Glaser, a mortgage industry consultant who served in the Clinton administration.

A key element would loosen lending rules at government home loan giants Fannie Mae and Freddie Mac to let as many as 5 million homeowners who owe more than their homes are worth refinance to bring down their monthly payments. But that’s little comfort to many borrowers in places such as Arizona, California, Nevada and Florida; they owe far too much to qualify.

The plan “seems to offer little help to borrowers whose loan exceeds their property value by more than 5 percent,” John Courson, chief executive of the Mortgage Bankers Association, said in a statement.

The plan beefs up the role of Fannie and Freddie, which were seized by federal regulators last year, allowing them to hold an additional $50 billion each in mortgage investments.

The plan isn’t all about sweeteners for mortgage holders. Obama’s plan also requires that any financial institution benefiting from the $700 billion Wall Street bailout develop plans to help homeowners avoid foreclosures. Those rules apply to the largest banks, which are also the largest holders of home loans.

Yet some doubt that even those new rules will prod financial players that have been unwilling to help homeowners to do so now.

“It maintains a voluntary system of compliance,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer group.

Many Democrats and housing analysts believe that the only true way to force mortgage holders to help strapped borrowers is to give judges power to modify bankrupt homeowners’ loans, cutting the total they owe and their monthly payments.

Obama is backing that move as part of his housing plan, although it will be up to Congress to work out the details.

“It’s going to be a long, slow process because these mortgages have to be redone one by one,” the Heritage Foundation’s John said.

By Alan Zibel, Julie Hirschfeld Davis

2009 Ford F-150 trucks are ready to leave the assembly line in October at the Dearborn Truck Assembly in Dearborn, Mich.

Those corporate jets were just the beginning.

The fight over a multibillion-dollar bailout for Detroit’s Big Three automakers has exposed a deep and bitter disillusionment – in Washington and across the country – with car companies once considered icons of the nation’s industrial prowess.

Struggling for survival amid an economic maelstrom, once-mighty giants General Motors Corp., Ford Motor Co. and Chrysler LLC find themselves scapegoats for the misdeeds of huge banks that claimed chunks of a hastily enacted $700 billion bailout and hundreds of billions more with virtually no strings attached.

On top of that, they are battling a public perception that, rather than lions, they are lumbering dinosaurs whose coddled executives and well-paid workers are hanging on to a dying way of life.

The combination has sapped the political will for helping the auto industry. With the clock ticking down on the current Congress, Democratic leaders and the White House worked on a compromise providing some $14 billion in emergency loans to see the industry through the winter.

When the titans of the financial industry faced calamity this fall, Congress and the White House swooped in with unprecedented speed to pour $700 billion into the banks whose high-risk ventures nearly brought markets to their knees.

Auto company executives, who flew to Washington in private jets for their first, badly botched pleas for government help, are enduring a far longer wait, not to mention an extended public shaming after they visited Washington a second time – making the 500-plus-mile trip from Detroit in compact hybrid cars.

“We didn’t ask that the CEOs of the banks drive to town in a Wells Fargo armored truck,” Sen. Sherrod Brown, D-Ohio, said.

“I’m sure you all feel a little singled out,” Rep. Spencer Bachus, R-Ala., told the CEOs at a contentious Capitol Hill hearing. “There seems to be a glaring double standard.”

There’s little question that the carmakers are paying a price for the Wall Street rescue, enacted over bitter public opposition by a politically fearful Congress just a month before a high-stakes election.

“What’s at play as much as anything else is an embarrassed Congress that essentially wrote a blank check to (Treasury Secretary) Henry Paulson, and in doing so, enraged the public,” said Democratic pollster Peter Hart, who’s studied public opinion on the auto bailout.

“Along comes the automobile industry, and they decide, ‘This is where we’re going to lay down the markers, and now we can show that we’re good stewards of your money and we’re being diligent and tough.’ It’s an easy target,” Hart said.

That’s partly because of wounds the industry inflicted on itself, as it resisted a shift to smaller, more fuel-efficient cars in favor of gas-guzzling SUVs, and openly feuded with Congress over meeting stricter clean-air rules.

It’s also born of public outrage over what’s perceived as gold-plated contracts for autoworkers, with high hourly wages and rich retirement benefits. A commonly cited figure puts autoworkers’ hourly pay at more than $70, although the estimate actually describes the carmakers’ total pension, health care and other obligations to both employees and retirees, spread out among the number of workers currently on the job.

Still, like the CEOs’ jets, the figure has soured the public on an industry that during World War II earned Detroit the moniker “arsenal of democracy.”

The Big Three executives, their allies in Washington and Detroit and the powerful United Auto Workers have been scrambling to repair the auto industry’s image as they press their case for federal aid. A major part of their pitch: A carmaker failure would deepen an already painful recession — and kill off an industry that’s woven into the very fabric of America.

“A message to Washington: INVEST IN AMERICA,” blared a front-page editorial in the Detroit Free Press on Friday.

In the halls of Congress, lawmakers weren’t sure it would be money well-spent.

“I think you’re skating on extremely thin ice,” said Rep. Paul E. Kanjorski, D-Pa.

It’s an attitude auto industry allies say they’ve seen before.

“I don’t think there’s any question there’s a bias in favor of the financial services community and against manufacturing. I don’t know whether it’s an Eastern seaboard thing or an elitism thing,” said former Michigan Gov. Jim Blanchard, who helped design the bailout of Chrysler as a congressman in 1979. “The public loves to beat up on the auto industry and they love to criticize the companies.”

However unpopular the automakers are, though, policymakers in Washington are loath to be blamed for their demise, particularly given the potential impact on millions of their constituents’ jobs and pay. Already, the actual entry-level hourly wage for an auto worker is now around $14 – and falling.

At this rate, “The occupation that symbolized the middle class for workers in the 20th century becomes the working poor – you can build Chevys and get food stamps,” said Harley Shaiken, a University of California-Berkeley labor economist and Detroit native who has studied the automakers.

“All of a sudden,” Shaiken said, “to be an autoworker in America is not to be in the middle class, and that upends the story of economic success in the United States.”

Julie Hirschfeld Davis covers Congress and the auto bailout negotiations for The Associated Press.

White House Deputy Chief of Staff Joel Kaplan briefs reporters Wednesday at the White House in Washington about negotiations on a bill to provide government assistance to the financially ailing auto industry.

WASHINGTON – Majority Democrats and the Bush White House have finalized a deal to spend $14 billion on emergency loans for struggling U.S. automakers, congressional officials said Wednesday. Strong opposition lingered among some Republicans.

The White House did not go as far as to say the deal was final, although it did report “very good progress.” The measure could see a House vote later Wednesday and be enacted by week’s end.

It would create a government “car czar” to dole out the loans, with the power to force the carmakers into bankruptcy next spring if they didn’t cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.

Congressional Republicans, left out of negotiations on the package, are expressing grave reservations and may seek to block it.

Sen. David Vitter, R-La., promised to filibuster the measure, which could delay a final vote for days.

He said the package has an “ass-backwards” approach to curing what ails the U.S. auto industry— giving carmakers money immediately, and only later demanding that they restructure.

Nevertheless, Democratic leaders were confident enough that a bill could advance that they set a procedural vote for the House floor later Wednesday. Even still, Sen. Mitch McConnell, the GOP leader, said in late morning that his side hadn’t seen the measure yet and wouldn’t agree to votes on the measure Wednesday.

“Republicans will not allow taxpayers to subsidize failure,” McConnell said, although he added that the auto situation would be addressed by the end of the week.

The congressional officials revealed agreement on a bill only on grounds of anonymity because the deal has not been formally announced.

At the White House, Deputy Chief of Staff Joel Kaplan said the administration and Congress have made “very good progress on a conceptual agreement.”

“We’ll be talking retail to individual senators to win their support,” said Kaplan, who said he expected President George W. Bush to lobby Republicans to vote for the package.

Kaplan said it was critical that the legislation have a clear definition of what is long-term viability for the companies.

A breakthrough came when Democrats agreed to scrap language — which the White House had called a poison pill — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states, said congressional aides.

Environmentalists already were livid that the measure draws the emergency loans from an existing loan program to help carmakers retool their factories to make greener cars.

Kaplan also said the president was dispatching Chief of Staff Josh Bolten to Capitol Hill to make the case for the legislation with skeptical Republicans.

Kaplan said the Bush administration would work with President-elect Barack Obama’s team on choosing the so-called “car czar,” acknowledging that Bush’s tenure ends in 41 days and the automakers’ woes will continue well into 2009.

“We expect to work closely with the president-elect’s team on what is the most effective means of implementing this legislation,” Kaplan said.

Asked about the role of the “car czar,” Kaplan said: “This is not somebody who’s going to run the companies. This is someone who is going to bring them around the table, knock heads.”

“This is a bridge to either fundamental restructuring or bankruptcy,” he added. “They either have a long-term plan that’s viable or we get our money back. And if we call our money back, which is required under this bill, then those firms are not going to be able to survive.”

Getting 60 votes for an agreement, with many senators expected to be absent for the emergency, postelection debate, could be tricky.

Sen. Carl Levin, D-Mich., an ally of the auto industry, said, “This gets us to the 20-yard line, but getting over the goal line will take a major effort, particularly in the Senate.”

He called for Bush and President-elect Barack Obama to lobby personally for the auto bailout.

Obama defended the auto bailout as necessary given the threat a potential Big Three collapse could pose to an already battered economy.

“As messy as it may be, I think there’s a sense of, ‘Let’s stabilize the patient,’ ” he said in an interview published in Wednesday’s editions of the Chicago Tribune and Los Angeles Times.

He called the auto industry’s plight — lackluster sales, choked credit and widespread economic turmoil — “the perfect storm.”

A key compromise on the measure came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don’t strike restructuring deals by next spring. Democrats had proposed giving the overseer that option but not requiring it.

The measure would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the plan is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

The measure also includes a bail out of some of the nation’s largest transit systems. The bus and rail systems could be on the hook for billions of dollars in payments because exotic deals they entered into with investors — which have since been declared unlawful tax shelters — have gone sour with the collapse of American International Group Inc. and other financial institutions.

House Speaker Nancy Pelosi, D-Calif., and House Financial Services Committee Chairman Barney Frank, D-Mass., talk about a possible bailout of American automakers during a news conference on Capitol Hill in Washington on Monday.

WASHINGTON – Congress and the White House reached for a final deal Tuesday to speed a $15 billion loan package to the struggling U.S. auto industry, hoping for votes as early as day’s end.

Senate Majority Leader Harry Reid said he hoped for a vote by Wednesday as congressional Democrats and White House officials traded legislative proposals behind the scenes, haggling over the final details.

The core of the bill — and its aim — was not in dispute, however. It would provide emergency loans to two of Detroit’s Big Three auto makers — Ford Motor Co. has said it doesn’t need an immediate cash transfusion — and create a presidentially named “car czar.” The federal overseer would supervise a broad industry restructuring and would be empowered to yank the money back if the carmakers weren’t doing enough to ensure their own survival.

The fast-paced developments come amid an environment of general economic instability, the Congress and the presidency both in transition, a ricocheting Wall Street and the Federal Reserve Board, Treasury and other agencies fighting to steady the reeling financial industry.

A final deal hinged on only a couple of outstanding issues, Reid, D-Nev., said.

“We would hope that we could complete work on this Detroit situation tonight or tomorrow,” he said on the Senate floor.

Still, the few differences remaining were significant. The White House and congressional Republicans were demanding tougher consequences for carmakers that couldn’t prove to the government they were viable, including a requirement — rather than an option — for them to be cut off from federal aid.

Republicans also were demanding that Democrats scrap a requirement that car companies getting loans drop their lawsuits against states that impose tougher emissions standards than the federal rules.

Sen. Mitch McConnell, R-Ky., said he was concerned that Democrats were proposing a package that “fails to require the kind of serious reform that will ensure long-term viability for struggling automobile companies.”

With their approach, “We open the door to unlimited federal subsidies in the future,” McConnell said.

The White House has said it shares those concerns.

“There will not be long-term financing if they can’t prove long-term viability,” White House Press Secretary Dana Perino said.

She said the White House and Congress have made a lot of progress.

“I think overall we’re headed in the right direction,” Perino told reporters aboard Air Force One as President George W. Bush headed to West Point, N.Y., for a speech.

“We’re working fast. but we’re also wanting to get it right,” she said, adding that “I don’t know if we’ll have something finalized today. It’s possible.”

Reid said the timing of an auto rescue vote is uncertain, partly because lawmakers are still waiting on the White House to decide whether to request the second half of a $700 billion Wall Street bailout fund. “That decision has not been made yet,” he said.

The current Congress is ready to depart for the year after this week, with the auto bailout legislation among the only things delaying lawmakers’ abbreviated winter break.

Cash from the Big Three bailout would immediately be plowed into General Motors Corp. and Chrysler LLC. Ford said Monday night that it does not have an emergency cash-flow problem and that it would not ask for short-term assistance. The czar would come up with terms for restructuring the beleaguered firms by Jan. 1, 2009.

Sen. Chris Dodd, D-Conn., the Banking Committee chairman, said the White House was rightly being strict about terms the Big Three would have to meet, but added that it’s not up to Congress to set specific terms for an auto industry restructuring.

“The White House is being very tough, which I’m glad to hear. I wish they had been a little tougher about two weeks ago on” banks, Dodd said on MSNBC. “Clearly, it’s not Congress’ job to micromanage, hire and fire. I think you set up and put in place the people who know this industry, understand it, and then do the kind of major restructuring that has to occur.”

Dodd and Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, are leading negotiations with the White House on the plan.

Democrats have already given in to the White House on a key element of the measure — drawing the money from an existing loan program meant to help carmakers finance the production of greener cars.

The proposal would attach an array of conditions to the auto bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends, and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

The proposal gives the car czar say-so over any major business decisions by the automakers while they’re taking advantage of federal aid. The companies would have to open their books to the government, including informing the overseer of any transaction of $25 million or more.

Also under discussion is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol of the industry’s ineptitude when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

Under the Democrats’ proposal, if the Big Three didn’t come up with suitable restructuring plans by the end of March, the czar would have to submit his own blueprint to Congress for a government-mandated overhaul.

Sen. Carl Levin, D-Mich., a key ally of the auto industry, said getting the roughly 15 Republicans needed to support the plan was an uphill battle.

“This is a real hill to climb even if we can get agreement between the White House and congressional leaders,” he said.

Associated Press writer Ben Feller contributed to this report.

General Motors shows off a prototype of the Chevrolet Volt last month at the Los Angeles Auto Show.

Watch out for family fights, Mr. President-elect. Though Democrats will control both the new Congress and White House, the battle over a multibillion-dollar auto industry bailout already is pitting two major party constituencies against each other: big labor and environmentalists.

The United Auto Workers, along with Detroit’s Big Three, are pushing for an infusion of emergency loans for the carmakers’ immediate needs – even if that means diverting $25 billion that had been set aside for creating cleaner vehicles.

Environmentalists balk at that notion, saying the money is sacrosanct and insisting that any new help be tied to strict requirements for greener cars.

The intramural fight helps explain why President-elect Barack Obama has stayed vague on his views on the details of the bailout and Democratic leaders have seemed uncertain about whether to push one through.

It’s also at the heart of the disagreement between Democrats and the Bush administration over how to structure any carmaker rescue.

After rushing Congress back into session last month to consider an emergency auto aid plan, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., abruptly reversed course and called off the debate.

They ordered the Big Three to submit elaborate loan applications to Congress before they would even schedule votes on a rescue. The separate blueprints submitted Tuesday by Chrysler LLC, Ford Motor Co. and General Motors Corp. called for up to $34 billion in government aid.

Hearings are set for Thursday and Friday on Capitol Hill, and Reid said the Senate will begin debating a bailout on Monday — but neither he nor Pelosi has promised to act.

Even if lawmakers decide to lend the struggling industry a hand amid warnings that one or more of the big companies could go bust before year’s end, a battle is still raging over where the money should come from – and what conditions should be placed on it.

Reid said Wednesday that Democrats’ bid to tap the $700 billion Wall Street rescue fund for the carmaker aid lacked the votes to pass Congress. That puts the focus back on the plan to turn the green-cars program into emergency loans to keep the Big Three afloat.

If history and the unwritten rules of politics are any guide, the autoworkers and their brothers and sisters in organized labor are likely to win the day for the carmakers.

The unions have often prevailed in disputes with environmental activists, particularly in resisting tough fuel-efficiency rules, by deploying their formidable organizing and lobbying clout and making the case to lawmakers that their constituents’ jobs would suffer if labor didn’t get its way.

They’ve also provided far more financial support to Obama and Democratic candidates than environmental organizations have – more than 20 times as much in the last election, according to the Center for Responsive Politics, a nonpartisan campaign finance research organization.

Still, environmental groups enjoy powerful allies in the Democratic Party – Pelosi prominent among them – and exert a strong pull in policy debates.

“It is a challenge, because here you have the union core group that supports the Democratic Party and was very strong supporting Obama’s candidacy, and you have environmental groups who also are very strong in the Democratic Party, and when it comes to autos, those two constituencies conflict with each other,” said Richard W. Hurd, a Cornell University labor relations professor.

Democrats, particularly those who toppled Republicans or weathered tough re-election fights with the help of union money, “really would like to do something to help out” the auto industry, the backbone of the devastated U.S. manufacturing sector and a provider – directly or indirectly – of millions of jobs, Hurd said. “The problem is, what do you do about the environmental side of it?”

Labor and environmental activists are loath to call attention to their split, particularly at a time when both are working hard to forge alliances on key issues, including their call for enactment early next year of a massive economic recovery package that includes a $100 billion array of environmentally friendly projects estimated to create as many as 2.5 million “green jobs.”

But both concede privately that their agendas clash on the auto bailout, and people tracking the measure acknowledge that the rift has made a challenging situation even more challenging.

On one side is the full muscle of organized labor, arguing that there’s no option but to help the Big Three to stem the collapse of one or more of the storied companies and the disappearance of a huge number of unionized jobs.

“We have a situation here where we need the emergency assistance or the companies are in danger of collapsing,” said Alan Reuther the UAW’s legislative director. If that means borrowing from a $25 billion program that was supposed to be used for the firms to retool their factories so they could make cleaner-burning vehicles, so be it, he said.

“We’re confident the Obama administration will make sure the … program is fully funded,” Reuther said.

Environmental groups have long criticized the auto makers for focusing on gas-guzzling sport utility vehicles and pickup trucks, which yield higher profit margins, at the expense of a shift to smaller, greener vehicles.

Now they say proponents of a bailout are asking Congress and taxpayers to put aside the very environmental advances that could make the U.S. auto industry competitive in order to put a financial Band-Aid on three badly injured businesses.

Or, as Pelosi put it a couple of weeks ago: “It’s like taking your kids’ college education fund and spending it on your credit card bills.”

If the car companies are going to get the money they and the unions are clamoring for, said Phyllis Cuttino of the Pew Environment Group, “it needs to come with strong strings attached,” including requirements that they follow higher fuel-efficiency standards and drop their opposition to efforts by California and other states to impose even stricter rules.

“We have no quarrel or disagreement with the men and women of the work force for the Big Three,” Cuttino said. “We believe, like they do, that these three companies ought to start manufacturing cars that the American public wants and is demanding.”

Julie Hirschfeld Davis has covered Congress and the White House for 11 years. AP Writers Ken Thomas and Erica Werner contributed to this story.

Auto executives, from left, General Motors Chief Executive Officer Richard Wagoner, Chrysler Chief Executive Officer Robert Nardelli, and Ford Chief Executive Officer Alan Mullay prepare to testify on Capitol Hill in Washington on Friday before the House Financial Services Committee.

WASHINGTON ≠- Congressional leaders seized on grim new unemployment data on Friday to try to rally support for a rescue plan of up to $34 billion for automakers. But while lawmakers pondered a range of options, including a government-run management board, no individual plan seemed to be gaining much traction.

House Financial Services Committee Chairman Barney Frank, D-Mass., said failure of Congress to act now to help Detroit’s Big Three “would be a disaster.”

Senate Majority Leader Harry Reid, D-Nev., said the Labor Department’s report of 533,000 job losses in November — the biggest job loss in 34 years — makes the auto bailout even more urgent.

“We must … prevent the auto companies from collapsing, or we risk adding millions of more Americans to the unemployment line,” Reid said, noting that “more than 10 million workers (are) already unemployed.”

Still, Reid said that “any help must include specific requirements that ensure viability and strong oversight” of the industry.

CEOs of Detroit’s Big Three testified for a second day on why they needed an immediate infusion of up to $34 billion to survive, two weeks after they were sent home empty-handed and told to come back with more detailed plans of how they would spend the money and restructure their companies.

“We believe this is the least costly alternative,” Chrysler LLC chief executive Bob Nardelli told the House Financial Services Committee.

Frank said Friday’s unemployment figures were just one more reason for a government bailout.

“For us to do nothing, to allow bankruptcies and failures in one or three of these companies in the midst of the worst credit crisis and the worst unemployment situation that we’ve had in 70 years would be a disaster,” Frank said.

Skeptical lawmakers are weighing how to help the automakers as the once-mighty companies teeter on the edge of collapse.

Congressional leaders have urged the Bush administration to do more to help the industry, and have called on the Federal Reserve to give the auto companies the kind of low-cost loans the central bank has been awarding to financial firms.

Outside the Capitol, auto suppliers representing 50 states and wearing blue hockey jerseys emblazoned with the number of supplier jobs in their states gathered.

“This is not a bailout. This is a loan that will help us recover for the future,” said Jim Seta, 37, who works at a Gainesville, Ga., plant owned by supplier SKF. The plant employs 320 and makes bearing parts for transmissions used in General Motors vehicles.

Supporters of the auto makers said they were hopeful that the industry’s dire outlook was starting to sway lawmakers. “I think we’ve turned the corner where we’ve now made the case that this is serious, this is real and something needs to happen,” said Sen. Debbie Stabenow, D-Mich.

The three CEOs from General Motors Corp., Ford Motor Co. and Chrysler LLC appeared before the House panel after testifying for nearly six hours on Thursday before the Senate Banking Committee on their new $34 billion plan — up from the $25 billion they unsuccessfully requested just two weeks ago.

“I don’t want to send you home again because it’s going to get more expensive,” joked Democratic Rep. Gary Ackerman of New York.

He told the automakers they faced “the fury of the American public” and that was making it harder for Congress to reach a consensus.

Under one proposed plan, the government would order a major restructuring of the domestic automakers in exchange for a multibillion-dollar bailout.

With several lawmakers in both parties pressing automakers to consider a pre-negotiated bankruptcy — something they have consistently shunned — members of Congress and the Big Three both were contemplating a government-run restructuring that would yield similar results, including massive downsizing and labor givebacks.

Despite the urgency of the automakers’ appeals and the prodding of congressional Democratic leaders, bailout fatigue was widespread on Capitol Hill and many lawmakers remained unconvinced they should support yet another rescue by taxpayers.

Democratic congressional leaders are leaning on President George W. Bush to tap into the already enacted $700 billion Wall Street bailout fund to aid the auto industry, arguing that a carmaker collapse would have a devastating impact on the financial firms the program is designed to help.

The Bush administration has said it has no intention of doing so, arguing that the money was supposed to be for financial institutions, and instead wants to convert the fuel-efficiency money into emergency loans.

Auto state lawmakers are threatening to block the administration from accessing the second half of the financial rescue fund unless it comes to the aid of the Big Three.

And President-elect Barack Obama wasn’t stepping forward with an alternative. Frank, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said Obama is “going to have to be more assertive than he’s been.”

Associated Press writer Ken Thomas contributed to this report.

Auto industry executives (from left) General Motors Chief Executive Officer Richard Wagoner, Chrysler Chief Executive Officer Robert Nardelli and Ford Chief Executive Officer Alan Mulally, testify on Capitol Hill in Washington, D.C. on Wednesday.

WASHINGTON – Democratic leaders in Congress sidetracked legislation to bail out the auto industry Thursday and demanded the Big Three develop a plan assuring the money would make them economically viable.

“Until they show us the plan, we cannot show them the money,” Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.

She and Senate Majority Leader Harry Reid, D-Nev., said Congress would return to work in early December to vote on legislation if the General Motors Corp., Ford Motor Co. and Chrysler LLC produce an acceptable plan.

The decision averted a likely defeat of legislation providing $25 billion loans for the industry. Reid and Pelosi both said there was no plan in circulation that could pass both houses of Congress and win President George W. Bush’s approval.

While the decision headed off the defeat of one bill, it did not necessarily translate into passage of a different one.

As a result, the fate of hundreds of thousands of auto workers and even of an iconic American industry hangs in the balance.

The chief executives of the Big Three automakers appealed personally to lawmakers for the loans this week, and warned that their industry might collapse without them. In testimony, they said their problem was that credit was unavailable, and not that they were manufacturing products that consumers had turned their backs on.

But whatever support they found sagged when it became known that each of them had flown into Washington aboard multi-million dollar corporate jets. Reid observed that was “difficult to explain” to taxpayers in his home town of Searchlight, Nev.

The automakers are on a tight timeline. Reid and Pelosi said their plan must be turned over to key lawmakers by Dec. 2 They said hearings were possible the first week of December, and Congress may return to session the following week to consider legislation.

Pelosi stressed that whatever the Big Three provided to Congress, it must show they had a plan for “viability and accountability,” meaning that the were transforming theoir industry in a way that it would become competitive, and that they were clear about how the federal loan money was used.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. One possibility is to seek a partial ownership of the companies. Another is to limit salaries of top executives. A third is to prohibit use of the funds for any lobbying.

By Ken Thomas, Julie Hirschfeld Davis

Barack’s big win

Obama’s big win

Around the country and around the world, many celebrated the election of Barack Obama to the White House.

Producer: JUDY CARLOCK and DYLAN SMITH/Tucson Citizen

Slide 1 of 19.
President-elect Barack Obama speaks in Chicago.
Source: The Associated PressSlide 2 of 19.
President-elect Barack Obama speaks in Chicago.
Source: The Associated PressSlide 3 of 19.
A sea of supporters wait for Obama to speak.
Source: The Associated PressSlide 4 of 19.
Vice president-elect Joe Biden holds one his grand-daughters during President-elect Barack Obama's election night party.
Source: The Associated PressSlide 5 of 19.
Oprah Winfrey waits with Stedman Graham at the election night party for President-elect Barack Obama at Grant Park in Chicago, Tuesday night.
Source: The Associated PressSlide 6 of 19.
Michelle Moore, of Boise, takes a picture of her husband Tom Moore, as he stands with a Barack Obama life size cutout at the Idaho Democratic Headquarters at the Hilton Garden Inn in Boise, Idaho.
Source: The Associated PressSlide 7 of 19.
The crowd reacts as it is announced on television that Barack Obama has been elected the President of the United States at his election night party at Grant Park in Chicago, Tuesday night.
Source: The Associated PressSlide 8 of 19.
Christine King Farris, sister of civil-rights leader Martin Luther King Jr., is embraced by Rushie Jones after a cable news channel projected Democratic presidential candidate Barack Obama as the winner during an election-night party at Ebenezer Baptist Church in Atlanta, Tuesday.
Source: The Associated PressSlide 9 of 19.
Jesse Jackson weeps as returns come in.
Source: The Associated PressSlide 10 of 19.
A group in Japan celebrates Obama's win.
Source: The Associated PressSlide 11 of 19.
A member of Democrats Abroad in the Philippines gestures as she watches results leading to the predicted victory of Democratic presidential candidate Sen. Barack Obama during an election watch in suburban Manila, Philippines on Wednesday.
Source: The Associated PressSlide 12 of 19.
Kenyan family members of U.S. Democratic Presidential candidate Barack Obama celebrate after his victory in the U.S. election was announced, at the family's homestead in Kogelo village, Kenya. The village is where Obama's step-grandmother lives. Barack Obama's Kenyan family erupted in cheers Wednesday, singing "We are going to the White House!" as Obama became the first African-American elected president in the United States.
Source: The Associated PressSlide 13 of 19.
Emily Berkson, from Chicago, left, and Krista Anne Nordgren from Chapel Hill, N.C. watch the speech of President-Elect Barack Obama in an overflow area of Grant Park.
Source: The Associated PressSlide 14 of 19.
Obama celebrates with his daughter, Malia.
Source: The Associated PressSlide 15 of 19.
U.S. Army Sgt. Patrick Kopecky, 24, from Manitowoc, Wis., left, phones home as a television broadcasts U.S. President-elect Barack Obama's acceptance speech at Forward Operating Base Marez in Mosul, Iraq
Source: The Associated PressSlide 16 of 19.
Obama kisses his wife, Michelle, after his acceptance speech.
Source: The Associated PressSlide 17 of 19.
Marissa Wilkes, left, and Ladona Miller react as they learn of Barack Obama's victory during an election party for Senator-elect Kay Hagan in Greensboro, N.C., Tuesday.
Source: The Associated PressSlide 18 of 19.
The marquee of the famous Apollo theater proclaims the victory of President-elect Barack Obama early Wednesday, Nov. 5, 2008 in the Harlem section of New York.
Source: The Associated PressSlide 19 of 19.
In Phoenix, U.S. Sen. John McCain, with running mate Sarah Palin, reassured crowds at the Arizona Biltmore, silencing when they booed Sen. Barack Obama.
Source: The Associated Press

Related: Dems make broad gains in U.S. House, expand majority

Voters line up outside a polling station on election day in the South End neighborhood of Boston., Tuesday.

Democrats expanded their majority in the House with historic gains by dominating the Northeast and ousting Republicans in every region.

Their defeat of 22-year veteran Rep. Chris Shays in Connecticut gave Democrats every House seat from New England. Their victory in an open seat on New York’s Staten Island gave them control of all of New York City’s delegation in Washington for the first time in 35 years.

Democrats also rode the coattails of a decisive victory by Barack Obama in New Mexico to win one House seat they haven’t controlled in four decades and another the GOP had held for 28 years. Both were left up-for-grabs by GOP retirements.

“The American people have called for a new direction. They have called for change in America,” said House Speaker Nancy Pelosi, D-Calif. Exit polls showed voters troubled by the battered economy and deeply dissatisfied with President Bush.

Democrats unseated 12 Republican incumbents and captured nine open GOP seats, capitalizing on the unusually high 29 Republican departures. Republicans were only able to knock off four Democratic incumbents.

With fewer than a dozen races undecided, Democrats had won 251 and were leading for another five. Republicans had won 171 and were leading in six. If those trends held, Democrats could have a net gain of 20 seats. And Republicans were on track for their smallest numbers since 1994, the year a Republican Revolution retook the House for the first time in 40 years.

The Democratic edge in the current Congress is 235-199 with one vacancy in a formerly Democratic seat. Two Louisiana seats, one Democratic and one Republican, won’t be decided until December because hurricanes postponed their primaries until Tuesday.

It was the first time in more than 75 years that Democrats were on track for big House gains in back-to-back elections. They picked up 30 seats in 2006.

“This will be a wave upon a wave,” Pelosi said.

Republicans were licking their wounds and cheered themselves mostly by the prospect that Democrats — now holding the White House and bigger House and Senate margins — might overreach and position the GOP for gains in 2010.

“We sort of got through this, we think, a little bit better than some people might have expected,” said Rep. Tom Cole of Oklahoma, the head of the Republican House campaign committee. “Our worst days are behind us.”

Still, in the first hint of what promises to be a GOP shakeup, Rep. Adam Putnam of Florida, the No. 3 Republican, told colleagues in a letter released near midnight that he was “reluctantly” stepping down from his post.

In the northeast, GOP Reps. John R. “Randy” Kuhl of New York and Phil English of Pennsylvania were defeated. Democrat Eric Massa unseated Kuhl in New York’s southern tier, and Kathy Dahlkemper, a 50-year-old mother of five, toppled English in a swing district of rural communities and old industrial steel towns in Pennsylvania’s northwest corner.

In Connecticut, Democrat Jim Himes, a Greenwich businessman, defeated Shays despite the Republican’s highly publicized late criticism of McCain’s presidential campaign.

In upstate New York, former congressional staffer Dan Maffei won election to succeed retiring GOP Rep. Jim Walsh, becoming first Democrat in nearly 30 years to represent the district around Syracuse. Downstate, Democratic city councilman Mike McMahon won the race on Staten Island to succeed GOP Rep. Vito Fossella, R-N.Y., who was forced to resign amid drunk driving charges and revelations that he fathered a child from an extramarital affair.

In the South, too, Democrats made inroads. Montgomery Mayor Bobby Bright won election to succeed a retiring Republican in Alabama, despite his GOP’s opponents attempts to tie him to Obama. High school civics teacher Larry Kissell won in North Carolina, defeating Republican Rep. Robin Hayes.

Democrat Gerald Connolly, a former chairman of the Fairfax County Board of Supervisors, was elected to succeed retiring GOP Rep. Thomas M. Davis III in a northern Virginia district that’s trending more Democratic because of an influx of new voters. And in a heavily military district around Hampton Roads, Rep. Thelma Drake, R-Va., fell to Democrat Glenn Nye, who had been a foreign service officer in Aghanistan and Iraq.

In Florida, GOP Rep. Tom Feeney — under fire for ties to disgraced lobbyist Jack Abramoff — was the first incumbent to fall, losing to former state Rep. Suzanne Kosmas. To the east, Rep. Ric Keller, R-Fla., lost to Democratic attorney Alan Grayson, in an increasingly Hispanic district in Orlando.

Democrats also made inroads in the West, where Democratic businesswoman Betsy Markey in Colorado unseated conservative GOP Rep. Marilyn Musgrave. In the Las Vegas suburbs, veteran state legislator Dina Titus unseated Republican Rep. Jon Porter. In addition to the two open New Mexico seats, Democrats captured one in Arizona, left open by retiring GOP Rep. Rick Renzi, who’s awaiting trial on corruption charges.

In suburban Detroit, Democrat Gary Peters, a former state lottery commissioner and senator, ousted Republican Rep. Joe Knollenberg. In a Republican-leaning district in southern Michigan, Democrat Mark Schauer, a state senator, beat first-term GOP Rep. Tim Walberg. The Illinois Senate majority leader, Democrat Debbie Halvorson, won a seat formerly held by retiring GOP Rep. Jerry Weller in the swing exurbs and rural areas south of Chicago.

Democrats also knocked out 14-year veteran GOP Rep. Steve Chabot of Ohio in a district that includes portions of Cincinnati, which has the largest black population of any congressional district in the nation held by a Republican. Obama’s candidacy was a major factor in the race, where state Sen. Steven Driehaus won election. And Democratic state Sen. John Boccieri, an Iraq and Afghanistan veteran, captured the seat of retiring Rep. Ralph Regula, R-Ohio.

The news wasn’t all good for Democrats, who lost three first-termers in the South, and Kansas Rep. Nancy Boyda, whose Topeka-based seat went to Lynn Jenkins, the GOP state treasurer.

Republican attorney Tom Rooney defeated Rep. Tim Mahoney of Florida, who had admitted to two extramarital affairs just weeks before Election Day. Republican Bill Cassidy dealt a bruising defeat to Rep. Don Cazayoux, D-La., elected in a special election six months ago. And in Texas, Republican Pete Olson, a former chief of staff to Sen. John Cornyn, beat Democratic Rep. Nick Lampson.

But other freshman Democrats once considered vulnerable cruised to easy re-election.

First-term Democratic Reps. John Yarmuth of Kentucky, Indiana’s Joe Donnelly and Brad Ellsworth, and New Hampshire’s Rep. Carol Shea-Porter won easy re-election. They were part of a crop of freshman Democrats in conservative-leaning districts who began compiling campaign war chests and moderate voting records almost from the moment they were elected two years ago, leaving only a few of them endangered on Tuesday.

Former five-term Republican Rep. Anne Northup was unable to mount a comeback in Louisville, Ky., against Yarmuth despite GOP presidential nominee John McCain’s decisive victory in the state.

Rep. John P. Murtha, D-Pa., who chairs a subcommittee with the most influence on the Pentagon’s spending, who had a scare after calling his district south of Pittsburgh “racist,” won easy re-election.

Democratic candidates raised $436 million, compared with Republicans’ $328 million, according to federal data compiled by the nonpartisan Center for Responsive Politics. The Democratic Congressional Campaign Committee poured $76 million into competitive races and the National Republican Congressional Committee spent $24 million.

In Louisiana, indicted Democratic Rep. William Jefferson was cruising to victory in a Democratic primary.
The nation votes

The nation votes

Images from around America, as voters lined up to cast ballots and politicians delivered last stump speeches.

Producer: DYLAN SMITH/Tucson Citizen

Slide 1 of 20.
With the Chicago skyline as a backdrop, workers prepare the stage in Grant Park for the election night party for Democratic presidential candidate Sen. Barack Obama, D-Ill., at Grant Park in Chicago.
Source: The Associated PressSlide 2 of 20.
Customers enjoy a dance in the Ollie Hayes pub as they watch the election results in Moneygall, Ireland, Tuesday, Nov. 4, 2008. The town of Moneygall, is known to be an ancestral home of Brack Obama were local people have taken a keen interest in the elections. The local church has records of Obama's ancestral past in the town, and the US presidential election has provoked great interest.
Source: The Associated PressSlide 3 of 20.
Supporters cheer as they hear results from television that President-elect Barack Obama has been elected President of the United States at his election night party at Grant Park in Chicago.
Source: The Associated PressSlide 4 of 20.
Supporters cheer as they hear results from television that President-elect Barack Obama has been elected President of the United States at his election night party at Grant Park in Chicago.
Source: The Associated PressSlide 5 of 20.
Democratic presidential candidate Sen. Barack Obama, D-Ill. talks to his daughter Malia as he casts his votes at a polling place in Chicago, Tuesday.
Source: The Associated PressSlide 6 of 20.
Republican presidential candidate Sen. John McCain, R-Ariz., speaks to the crowd at a rally at Great Southwest Aviation in Roswell, N.M., on the eve of the general election on Monday.
Source: The Associated PressSlide 7 of 20.
A poll worker in Madison, Miss., reaches out with an "I voted" sticker for a voter to put on his shirt Tuesday.
Source: The Associated PressSlide 8 of 20.
Sean "Diddy" Combs emerges from a voting booth after casting his ballot at a polling station at Coalition High School in New York.
Source: The Associated PressSlide 9 of 20.
Republican presidential candidate Sen. John McCain, R-Ariz., accompanied by his wife Cindy, votes in the 2008 presidential election at the Albright United Methodist Church in Phoenix, Ariz., Tuesday.
Source: The Associated PressSlide 10 of 20.
Dixville Notch residents wait for the stoke of midnight to be the first voters for the nation's presidential election. The New Hampshire hamlet chose Obama over McCain, 15-6 votes.
Source: The Associated PressSlide 11 of 20.
Voters line up before 6 a.m. outside the City Hall East voting precinct in Richmond, Va.
Source: The Associated PressSlide 12 of 20.
Sheryl Salvadore walks "Mojo" her five-month-old, Obama-sign wearing Australian Shepherd outside a polling place Tuesday Nov. 4, 2008 in Fishhawk Ranch, Fla.
Source: The Associated PressSlide 13 of 20.
Kennedy School student Colten Vander Meulen, marks his ballot in support of US Sen. Barack Obama, D-Ill., during a mock election at school Tuesday, Nov. 4, 2008 in Dubuque, Iowa.
Source: The Associated PressSlide 14 of 20.
Templeharry Church of Ireland rector Stephen Neill with the record books of births and marriages that contains details of distant ancestors of Senator Barack Obama in the town of Moneygall, Ireland, Tuesday, Nov. 4, 2008. The town of Moneygall , is the ancestral home of Brack Obama where local people have taken a keen interest in the US elections.
Source: The Associated PressSlide 15 of 20.
Republican presidential candidate Sen. John McCain, R-Ariz., addresses supporters from the steps of the Yavapai County Court House during a campaign rally in Prescott on Monday night.
Source: The Associated PressSlide 16 of 20.
Harris County Commissioner Steve Radack hands out plungers to passersby at Westcott and Memorial Nov. 4, 2008 in Houston, Texas. Radack, a Republican, bought more than 1,000 plungers to give away as a reference to "Joe the Plumber" in support of the McCain/Palin ticket.
Source: The Associated PressSlide 17 of 20.
Democratic vice-presidential candidate, Sen. Joe Biden, D-Del. delivers his election eve speech at Copley High School in Copley, Ohio.
Source: The Associated PressSlide 18 of 20.
Alaskan governor Sarah Palin speaks during her campaign stop at the Reno, Nev., Livestock Events Center Monday.
Source: The Associated PressSlide 19 of 20.
With the Sears Tower looming in the background at left, workers install bullet-proof glass on the stage near the podium for Democratic presidential candidate Sen. Barack Obama, D-Ill., as the final preparation are made for election night in Grant Park.
Source: The Associated PressSlide 20 of 20.

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RESULTS MAP

Get updated national election results at tucsoncitizen.com/election

WASHINGTON – Americans’ retirement plans have lost as much as $2 trillion in the past 15 months — about 20 percent of their value — Congress’ top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers’ nest eggs.

The upheaval that has engulfed financial firms and sent the stock market plummeting is also devastating people’s savings, forcing families to hold off on major purchases and even delay retirement, Peter Orszag, the head of the Congressional Budget Office, told the House Education and Labor Committee.

As Congress investigates the causes and effects of the meltdown, the panel pressed economists and other analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.

“Unlike Wall Street executives, America’s families don’t have a golden parachute to fall back on,” said Rep. George Miller, D-Calif., the panel chairman. “It’s clear that their retirement security may be one of the greatest casualties of this financial crisis.”

More than half the people surveyed in an Associated Press-GfK poll taken Sept. 27-30 said they worry they will have to work longer because the value of their retirement savings has declined.

Orszag indicated the fear is well-founded. Public and private pension funds and employees’ private retirement savings accounts — like 401(k)’s — lost about 10 percent between the middle of 2007 and the middle of this year, and lost another 10 percent just in the past three months, he estimated.

Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks, Orszag added.

“Some people will delay their retirement. In particular, those on the verge of retirement may decide they can no longer afford to retire and will continue working,” Orszag said.

A new AARP study found that because of the economic downturn, one in five workers 45 and older has stopped putting money into a 401(k), IRA or other retirement savings account during the past year, and nearly one in four has increased the number of hours he works. More than one-third of these workers have considered delaying retirement, according to the study, which also found that more than half now find it difficult to pay for basic items such as food, gas and medicine.

The hearing came just as workers are receiving — or about to receive — their quarterly retirement savings account statements, which are likely to show disheartening drops in the value of holdings.

Jerry Bramlett, the head of BenefitStreet Inc., a retirement savings plan administration company, said there’s a risk that people will overreact to the bad news by pulling their money out of the accounts, which could add to their potential losses.

“For participants with many years of retirement, a drastic abandonment of equity positions in their retirement account will only serve to lock in as-of-yet-unrealized losses. Markets do go up and down, and 401(k) participants must try to think long-term,” Bramlett said.

Still, he said workers should do their best to diversify their retirement savings accounts and “perhaps consider less volatile investments.”

On the heels of enacting a $700 billion market bailout, lawmakers are searching for ways to help workers who are feeling the ripple effects of the financial crisis.

“What should we be doing to try to find a way to salvage the retirement position of American workers?” said Rep. Dennis Kucinich, D-Ohio, an opponent of the government rescue plan. Congress, he added, “rushed to protect Wall Street in hopes that some benefits would trickle down to workers.”

The massive losses have already reopened a bitter and long-running debate about what role — if any — the government should play in helping workers save for retirement.

Some experts argue that the hefty tax subsidies that Congress has put in place in recent decades for 401(k) and other worker-contribution accounts have made people’s retirement income less secure by shifting risks, decisions and costs from employers to people who often know little about investing.

“They are fatally flawed,” Teresa Ghilarducci, an economist at the New School for Social Research, said of the tax-advantaged plans. “They’re too risky, and it’s not good policy to have workers run their own retirement plan. They want government help.”

Common mistakes workers make include overinvesting in a single stock — often their company’s — and participating in funds that carry large fees or involve excessive risk, the witnesses said.

“You cannot tell the participants at the bottom of your fund prospectus, ‘Warning: Your psychology may lead you to make irrational choices,”‘ said Christian E. Weller of the University of Massachusetts Boston.

The current market turmoil adds to an already difficult retirement savings picture for Americans, who are increasingly shouldering the burden of managing and funding their own company-sponsored retirement savings plans as firms eliminate traditional pensions.

Even before the recent downturn, older Americans were on track to continue working longer. Twenty-nine percent of people in their late 60s were working in 2006, up from 18 percent in 1985, according to the Bureau of Labor Statistics. Over the next decade, the number of workers who are 55 and older is expected to increase at more than five times the rate of the overall work force, the BLS reported.

Falling home values and now the decimation of much of their savings could plunge older Americans into period of austerity not seen in decades, Miller said: “The fear factor is huge, and they don’t see the availability of resources to them to get well.”

Orszag said the situation has little precedent in American history.

“The period that we’re experiencing is arguably the greatest collapse in confidence that we’ve experienced since the Great Depression,” he said.

A man demonstrates outside the Lehman Brothers headquarters last month in New York. Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for Chapter 11 protection. But even as the firm was seeking federal assistance, it was paying its executives millions.

WASHINGTON – Days from becoming the largest bankruptcy in U.S. history, Lehman Brothers steered millions to departing executives even while pleading for a federal rescue, Congress was told Monday.

As well, executives who feared for their bonuses in the company’s last months were told not to worry, according to documents cited at a congressional hearing. One executive said he was embarrassed when employees suggested that Lehman executives forgo bonuses, and cracked: “I’m not sure what’s in the water.”

The first hearing into what caused the nation’s financial markets to collapse last month, precipitating a $700 billion bailout, opened with finger-pointing and glimpses into internal company documents from Lehman’s chaotic last hours.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, said the giant investment bank was “a company in which there was no accountability for failure.” Lehman’s collapse set off a panic that within days had President Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.

Richard S. Fuld Jr., chief executive officer of Lehman Brothers, declared to the committee “I take full responsibility for the decisions that I made and for the actions that I took.” He defended his actions as “prudent and appropriate” based on information he had at the time.

“I feel horrible about what happened,” he said.

Waxman questioned Fuld on whether it was true he took home some $480 million in compensation since 2000, and asked: “Is that fair?”

Fuld took off his glasses, held them, and looked uncomfortable. He said his compensation was not quite that much.

“We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders,” he said. Fuld said he took home over $300 million in those years — some $60 million in cash compensation.

Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman’s compensation board that three executives leaving the company be given $20 million in “special payments.”

“In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,” Waxman said before Fuld appeared as a witness.

The government let Lehman go under Sept. 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shocks and failures that put Washington on track for the multibillion-dollar rescue starting the end of that week.

Waxman described that plan as a life-support measure. “It may keep our economy from collapsing but it won’t make it healthy again,” he said.

That sentiment echoed on Wall Street, where the Dow Jones industrials sank below 10,000 on Monday for the first time in four years. Investors fear the crisis will weigh down the global economy and the bailout won’t work quickly to loosen credit markets.

The rescue plan, now law, was so rushed that the usual congressional scrutiny is only coming now, after the fact.

“Although it comes too late to help Lehman Brothers, the so-called bailout program will have to make wrenching choices, picking winners and losers from a shattered and fragile economic landscape,” said Rep. Tom Davis of Virginia, the committee’s senior Republican.

Waxman said that in January, Fuld and his board were warned the company’s “liquidity can disappear quite fast.”

Despite that warning, he said, “Mr. Fuld depleted Lehman’s capital reserves by over $10 billion through year-end bonuses, stock buybacks, and dividend payments.”

Waxman quoted Fuld as saying in one document, “Don’t worry” to the suggestion that executives go without bonuses.

That suggestion came from Lehman’s money management subsidiary, Neuberger Berman. Waxman quoted George H. Walker, President Bush’s cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.

“Sorry team,” he wrote to the executive committee, according to Waxman. “I’m not sure what’s in the water at 605 Third Avenue today…. I’m embarrassed and I apologize.”

Rep. Elijah Cummings, D-Md., said: “I wonder how he sleeps at night.”

Fuld said in his statement that the company did everything it could to limits its risks and save itself.

“In the end, despite all our efforts, we were overwhelmed, others were overwhelmed, and still other institutions would have been overwhelmed had the government not stepped in to save them,” he said.

Arizona delegation splits

House Financial Services Committee Chairman, Rep. Barney Frank, D-Mass., talks with reporters after meeting with fellow Democrats about the financial bailout package Thursday, Oct. 2, 2008 in Washington.

WASHINGTON – With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush who quickly signed it.

“We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said shortly after the vote, although he conceded, “our economy continues to face serious challenges.”

Underscoring that somber warning, the Dow Jones industrials, up more than 200 points at the time of the House vote, had fallen into negative territory an hour later. They fluctuated as the afternoon wore on.

The final vote, 263-171 in the House, capped two weeks of tumult in Congress and on Wall Street, punctuated by daily warnings that the country confronted the gravest economic crisis since the Great Depression if lawmakers failed to act. There were 58 more votes for the measure than an earlier version that failed on Monday.

Arizona’s 8-member congressional delegation split with Democrats Gabrielle Giffords, Harry Mitchell and Ed Pastor voting for the bill, along with Republican John Shadegg. Democrat Raúl Grijalva joined Republicans Trent Franks, Jeff Flake and Rick Renzi voting against it.

“We all know that we are in the midst of a financial crisis,” House Republican leader John Boehner of Ohio said shortly before casting his vote for a massive government intervention in private capital markets that was unthinkable only a month ago.

“And we know that if we do nothing, this crisis is likely to worsen and to put us into an economic slump like most of us have never seen,” he said.

House Speaker Nancy Pelosi, D-Calif., said the bill was needed to “begin to shape the financial stability of our country and the economic security of our people.”

Treasury Secretary Henry Paulson pledged to begin using his new authority quickly, and Federal Reserve Chairman Ben Bernanke said the central bank would work closely with the administration.

Wall Street welcomed the action, but investors also were buffeted by a bad report on the job market. The Labor Department said employers slashed 159,000 jobs in September, the largest cut in five years and further evidence of a sinking economy.

At its core, the bill gives the Treasury Department $700 billion to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit in the U.S. economy has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand, and adversely affecting consumers seeking financing for mortgages, cars and student loans. Some state governments have also experienced difficulty borrowing money.

The House vote marked a sharp change from Monday, when an earlier measure was sent down to defeat, largely at the hands of angry conservative Republicans. A total of 33 Democrats and 25 Republicans switched from opposition to support. Several of the Democrats were members of the Congressional Black Caucus who said presidential candidate Barack Obama had pledged to support legislation easing the burden on consumers if he wins the White House.

Republican presidential candidate John McCain also lobbied for the measure, according to aides who declined to release a list of lawmakers he called.

Following Monday’s vote, Senate leaders quickly took custody of the measure, adding on $110 billion in tax and spending provisions designed to attract additional support, then grafting on legislation mandating broader mental health coverage in the insurance industry. The revised measure won Senate approval Wednesday night, 74-25, setting up a furious round of lobbying in the House as the administration, congressional leaders, the major party presidential candidates and outside groups joined forces behind the measure.

In addition, the measure was changed to broaden the federal government’s deposit insurance program, and the Securities and Exchange Commission loosened a regulation to ease the impact of the distressed assets on the balance sheet of financial institutions.

Despite occasionally strong criticism of the added spending and tax measures, the maneuvers worked — augmented by a sudden switch in public opinion that occurred after the stock market took its largest-ever one-day dive on Monday.

“No matter what we do or what we pass, there are still tough times out there. People are mad — I’m mad,” said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, “We have to act. We have to act now.”

Rep. John Lewis, D-Ga., another convert, said, “I have decided that the cost of doing nothing is greater than the cost of doing something.”

Critics were unrelenting.

“How can we have capitalism on the way up and socialism on the way down,” said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation — an unprecedented federal intervention into the private capital markets.

It was little more than two weeks ago that Paulson and Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.

White the main thrust of their initial proposal was unchanged, lawmakers insisting on greater congressional supervision over the $700 billion, measures to protect taxpayers and steps to crack down on so-called “golden parachutes” that go to corporate executives whose companies fail.

Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.

In the moments before the vote, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, pledged “serious surgery” next year to address the underlying causes of the crisis.

If anything, the economic news added to the sense of urgency.

The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. The news of the payroll cuts came on top of Thursday’s Commerce Department report that factory orders in August plunged by 4 percent.

Typifying arguments the problem no longer is just a Wall Street issue but also one for Main Street, lawmakers from California and Florida said their state governments were beginning to experience trouble borrowing funds for their own operations.

Pelosi said, “We must win it for Mr. and Mrs. Jones on Main Street.”

One month before Election Day, the drama unfolded in an intensely political atmosphere.

Members of the Congressional Black Caucus credited Obama with changing their minds.

Reps. Elijah Cummings and Donna Edwards, both Maryland Democrats, were among them. They said Obama had pledged if he wins the White House that he would help homeowners facing foreclosure on their mortgages. He also pledged to support changes in the bankruptcy law to make it less burdensome on consumers.

Obama’s rival, Republican Sen. McCain, announced a brief suspension in his campaign more than a week ago to try and help solve the financial crisis.

Republican Rep. Sue Myrick of North Carolina, who switched her vote to favor the measure, said, “I may lose this race over this vote, but that’s OK with me. This is the right vote for the country.”

The vote on Monday had staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrials.

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HOW ARIZONA VOTED

Nay – AZ-1 Renzi, Rick [R]

Nay – AZ-2 Franks, Trent [R]

Aye – AZ-3 Shadegg, John [R]

Aye – AZ-4 Pastor, Edward [D]

Aye – AZ-5 Mitchell, Harry [D]

Nay – AZ-6 Flake, Jeff [R]

Nay – AZ-7 Grijalva, Raul [D]

Aye -AZ-8 Giffords, Gabrielle [D]

WASHINGTON – After a week of tumult, an unprecedented government bailout of the financial industry gained ground in the House on Friday and leaders in both political parties expressed optimism the $700 billion measure would clear Congress by day’s end for President Bush’s signature.

With the economy showing fresh signs of weakness, the measure advanced past a key hurdle on a 223-205 vote.

An Associated Press tally showed 22 lawmakers who sent an earlier bailout bill to unexpected defeat on Monday had changed their minds and would vote in favor of the revised legislation, more than the dozen needed. Officials said changes made to the measure had sparked a far smaller number of defections among previous supporters.

“I’m optimistic about today. We’re not going to take anything for granted but it’s time to act,” said House Republican Leader John Boehner of Ohio.

“I think it will pass,” agreed Rep. Jim Clyburn, the chief Democratic vote-counter, as debate unfolded in the House chamber.

The Senate passed the measure earlier in the week on a bipartisan vote of 74-25.

“No matter what we do or what we pass, there are still tough times out there. People are mad — I’m mad,” said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, “We have to act. We have to act now.”

Rep. John Lewis, D-Ga., another convert, said, “I have decided that the cost of doing nothing is greater than the cost of doing something.”

Critics were unrelenting.

“How can we have capitalism on the way up and socialism on the way down,” said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation — an unprecedented federal intervention into the private capital markets.

If anything, the economic news added to the sense of urgency.

The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. Employers slashed 159,000 jobs from their payrolls, the most in five years. That came on top of Thursday’s Commerce Department report that factory orders in August plunged by 4 percent.

The stock market opened higher on anticipation that the bill would pass, and the financial industry shakeout rolled on unpredictably.

Wachovia announced it had agreed to be acquired by San Francisco-based Wells Fargo & Co rather than by Citigroup. Executives said the new arrangement would keep the Federal Deposit Insurance Corp., on the sidelines, thus preventing any depletion of the government’s fund that backs bank deposits.

The FDIC said it was sticking behind the Citigroup plan, leaving the fate of the bank in limbo.

It was little more than two weeks ago that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.

The core of the plan remains little changed from its conception — the Treasury Department would have $700 billion at its disposal to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand.

At the same time, lawmakers have dramatically changed the measure, insisting on greater congressional supervision over the $700 billion, taking measures to protect taxpayers, and insisting on steps to crack down on so-called “golden parachutes” that go to corporate executives whose companies fail.

Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.

The legislation had the support of the leadership in both parties — as was the case in the Senate, where it passed on Wednesday on a bipartisan vote of 74-25.

President Bush has been lobbying aggressively for its passage, and the White House issued the latest in a series of grim warnings of the risks of defeat. “If the financial markets fail to function, American families will face great difficulty in getting loans to purchase a home, buy a family car or finance a child’s education,” it said in a written statement.

The two major party presidential candidates, Barack Obama, the Democrat, and John McCain, the Republican also supported the bill and worked to assure its passage.

The vote on Monday staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrial Average.

Across the Capitol, party leaders decided to add legislation extending a series of popular tax breaks, as well as spending on rural schools and disaster aid. They also grafted on a bill to expand mental health coverage under private insurance plans.

At the same time, the change in federal deposit insurance and the action by the SEC on an obscure accounting rule helped produce a trickle of converts.

GOP Rep. Ileana Ros-Lehtinen of Florida, said she was switching her “no” vote to a “yes” after the Senate added some $110 million in tax breaks and other sweeteners before approving the measure Wednesday night.

“Monday what we had was a bailout for Wall Street firms and not much relief for taxpayers and hard-hit families,” Ros-Lehtinen told The Associated Press. “Now we have an economic rescue package.”

Republican Rep. Jim Ramstad of Minnesota also switched to “yes,” partly because the Senate attached the mental health measure.

Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, “America feels differently today than it did on Monday about this bill.”

And Democratic Rep. Shelley Berkley of Nevada said she would back the bill after business leaders in her Las Vegas-area district made it clear how much it was needed. She said, “There isn’t a segment of the population that hasn’t been slammed and is not asking for some relief.”

Senate Majority Leader Sen. Harry Reid, D-Nev., talks with reporters during a news conference on the passage of the Senate version of the bailout package Wednesday, Oct. 1, 2008 in Washington. From left, Sen. Christopher Dodd, D-Conn., Reid, Sen. Judd Gregg, R-N.H., and Senate Minority Leader Sen. Mitch McConnell, R-Ky.

WASHINGTON – Desperate to avoid another market-crushing defeat, House leaders won key converts Thursday to the $700 billion financial industry bailout on the eve of a make-or-break second vote.

President Bush and congressional leaders lobbied furiously for the dozen or so supporters they’d need to reverse Monday’s stunning setback and approve a massive rescue plan designed to stave off national economic disaster.

Anything but reassured, investors sent the Dow Jones industrials plunging another 348 points, suggesting Wall Street is expecting tougher economic times even if the measure is rushed into law. The Federal Reserve reported record emergency lending to banks and investment firms, fresh evidence of the credit troubles squeezing the country.

“A lot of people are watching,” Bush pointed out — as if lawmakers needed reminding — and he argued from the White House that the huge rescue measure was the best chance to calm unnerved financial markets and ease the credit crunch. He was calling dozens of lawmakers, a spokesman said.

Democratic and Republican leaders worked over wayward colleagues wherever they could find them.

Rep. Steny Hoyer, the second-ranking House Democrat, said there was a “good prospect” of approving the measure but stopped short of predicting passage — or even promising a vote. Nonetheless, the vote was expected on Friday. “I’m going to be pretty confident that we have sufficient votes to pass this before we put it on the floor,” Hoyer said.

The top Republican vote-counter, Rep. Roy Blunt of Missouri, did predict the measure would be approved.

Minds were changing in both parties in favor of the much-maligned measure, which would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions. If the plan works, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.

GOP Rep. Ileana Ros-Lehtinen of Florida, said she was switching her “no” vote to a “yes” after the Senate added some $110 million in tax breaks and other sweeteners before approving the measure Wednesday night.

“Monday what we had was a bailout for Wall Street firms and not much relief for taxpayers and hard-hit families. Now we have an economic rescue package,” Ros-Lehtinen told The Associated Press.

Rep. Zach Wamp of Tennessee, another of the 133 House Republicans who joined 95 Democrats Monday to reject the measure, also announced he was now onboard, even though “I hate it.” He told the AP, “Inaction to me is a greater danger to our country than this bill.”

Republican Rep. Jim Ramstad of Minnesota also switched to “yes,” partly because the Senate attached the bailout to legislation he spearheaded to give people with mental illnesses better health insurance coverage.

Democratic Rep. Emanuel Cleaver of Missouri was switching, too, said spokesman Danny Rotert, declaring, “America feels differently today than it did on Monday about this bill.”

And Democratic Rep. Shelley Berkley of Nevada said she would back the bill after business leaders in her Las Vegas-area district made it clear how much it was needed. She said, “There isn’t a segment of the population that hasn’t been slammed and is not asking for some relief.”

Emboldened by the feverish bidding for votes, other members of both parties were demanding substantial changes to the legislation before they would vote for it. A group of Republican opponents indicated they’d back it if the price tag were slashed to $250 billion and several special tax breaks added by the Senate — including for children’s archery bow makers, imported rum producers and racetrack owners —were removed. Democrats wanted to add a way to pay for the bailout and more help for homeowners staring at foreclosure.

Speaker Nancy Pelosi, D-Calif., said no, such revisions were impossible because they would slow the measure’s enactment and further shake markets.

“I don’t think that any changes here will do what we need to do, which is right now to send a message of confidence to the markets that Congress will act,” she said.

The Senate breathed new life into the measure Wednesday after the stinging House defeat, voting 74-25 to approve the bailout, with additions designed to appeal to key constituencies. Business lobbyists were also inundating Capitol Hill in a rush to win over wavering lawmakers in both parties.

The changes helped satisfy some Republican critics, but angered conservative “Blue Dog” Democrats who are concerned about swelling the deficit. Still, Hoyer predicted the number of Democratic defectors “is going to be minimal.”

A handful of Republicans who voted for the measure Monday appeared to be backing away from it.

“We can save ourselves from this rush to judgment,” said Rep. Spencer Bachus of Alabama, the top Republican on the Financial Services Committee. He argued Congress should approve just a fraction of the money requested and then “go home and answer the wrath of our constituents.”

In efforts to appease GOP opponents, the Senate added a provision to raise, from $100,000 to $250,000, the limit on federal deposit insurance.

House Republicans were also cheered by a decision by the Securities and Exchange Commission this week to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

The developments Wednesday prompted one Republican, Rep. John Shadegg of Arizona, to say he would support the new bill.

Peter DeFazio, D-Ore., said he still opposed the bill despite Senate inclusion of a program that pays rural counties hurt by federal logging cutbacks.

Beyond the Capitol, the drumbeat of bad economic news rattled on.

One government report said orders to factories plunged by the largest amount in nearly two years. Another said claims for jobless benefits hit a seven-year high. Investors appeared to be pulling money out of Wall Street and bracing for lengthy economic hard times.

Bush, meeting with business executives at the White House, said increasingly tight credit markets are not just hitting big banks in New York City but threatening the existence of small businesses across the country.

The modified Senate bill would extend several tax breaks popular with businesses, provisions that are favorites for most Republicans. It would keep the alternative minimum tax from hitting 20 million middle-income Americans, which appeals to lawmakers in both parties. And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

Help for rural schools was aimed mainly at lawmakers in the West.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others. Ros-Lehtinen singled it out as one reason she changed her mind.

Democratic leaders circulated data showing which states benefit most from an extension of a tax break for homeowners who do not itemize their tax returns. Texas, Florida, California and Pennsylvania ranked among the highest. The leaders hope the measure will bring support from black lawmakers, many of whom voted “no” earlier this week, among others.

AP White House Correspondent Terence Hunt contributed to this story.

By Charles Babington, Julie Hirschfeld Davis