Must-Read: Citizen McCain Goes to Washington

Jonathan Weisman's tictoc of McCain in Washingon on Thursday is a must-read in a weekend when we are all drowning in ink. The whole thing rewards attention, but I'll excerpt the guts of it here:

McCain's dramatic announcement Wednesday that he would suspend his campaign and come to Washington for the bailout talks had wide repercussions.

Democrats, eager to reach a deal before McCain could claim credit, hunkered down and made real progress ahead of his arrival. Conservative Republicans in the House reacted as well, according to aides who were part of the talks.

The Republican Study Committee, an enclave of House conservatives, had already begun turning against the Paulson plan. When McCain announced his return, the conservatives feared he would forge an agreement largely along Paulson's lines, with slight alterations and the GOP leadership's blessing.

"No one knew where he was going," one of the aides said.

Boehner, who had initially greeted Paulson's plan with some warmth, faces a brewing battle next year for the party leadership. Conservatives were making it no secret that they were thinking of backing House Deputy Republican Whip Eric Cantor (R-Va.) in a challenge to Boehner, and Paulson's request for $700 billion was not making matters better.

On Wednesday afternoon, Boehner appointed a new working group, led by Cantor, Ryan and Republican Study Committee Chairman Jeb Hensarling (R-Tex.), and including some moderates, to see if they could put together an alternative proposal. McCain's impending arrival shifted that effort into high gear. By the time McCain arrived in Boehner's office Thursday, the principles of a new plan were ready.

According to Republican aides, McCain was in Boehner's office when the announcement of a deal crossed their BlackBerrys. Rep. Spencer Bachus (Ala.), the House Republicans' representative in the talks, stumbled into the meeting to be peppered by participants with incredulous questions.

It was Ryan who made it most clear that there really was no deal. The core of Paulson's plan -- using $700 billion in taxpayer money to buy distressed assets from failing financial firms -- had to be changed, he told McCain. Instead, banks should have to pony up money for a new federally administered insurance program, like the Federal Deposit Insurance Corp. Banks suffering from mortgage defaults would then be able to draw funds from the insurance pool to remain solvent.

It was not a new idea, White House and Treasury officials said. Paulson and Federal Reserve Chairman Ben S. Bernanke had considered a similar option and rejected it. For one thing, asking banks teetering on the edge of bankruptcy to pay into the insurance fund would be like asking a patient facing heart surgery to buy health insurance before being wheeled into the operating room. The banks would be too weak to pay, and the cost of the insurance would be so high, drawing on the fund after a round of mortgage foreclosures would merely be repaying the banks what they had paid in.

Besides, one Treasury official said, it would do nothing to address the problem at hand. Banks would have no more money than they do now to lend. And they would still be holding the bad assets that are making it impossible for them to borrow.

Paulson made those points Wednesday at a contentious meeting with House Republicans. But Ryan convinced McCain that the idea had to be taken seriously to bring House Republicans on board.

"McCain has been trying to help the House guys, trying to get their ideas into the broader bill," said a senior Republican Senate aide. "If McCain can do that, he can bring 50 to 100 House Republicans to the bill. That would be a big damn deal."

McCain and Graham made just that point at the Tex-Mex lunch, but McCain also spoke in the starkly personal terms of a presidential candidate in trouble: "You all put me on the hook for $700 billion," he told his colleagues, according to an aide familiar with the lunch.

The breakdown was serious enough that word reached Paulson. Just 25 minutes before the scheduled meeting at the White House, Paulson phoned House Speaker Nancy Pelosi (D-Calif.) to alert her to trouble, according to a Senate Democratic leadership aide. When congressional leaders converged on the White House, the Democrats peeled off into the Roosevelt Room to discuss the revolt over the insurance plan. President Bush was kept waiting, something he has always hated.

After the cameras left the Cabinet room, Bush thanked everybody for their spirit of cooperation and said he knew it was not an easy vote. He knew elements still needed to be worked out and said he wanted to go around the table to hear people's views.

Pelosi said Obama would speak for the Democrats. Though later he would pepper Paulson with questions, according to a Republican in the room, his initial point was brief: "We've got to get something done."

Bush turned to McCain, who joked, "The longer I am around here, the more I respect seniority." McCain then turned to Boehner and Senate Minority Leader Mitch McConnell (R-Ky.) to speak first.

Boehner was blunt. The plan Paulson laid out would not win the support of the vast majority of House Republicans. It had been improved on the edges, with an oversight board and caps on the compensation of participating executives. But it had to be changed at the core. He did not mention the insurance alternative, but Democrats did. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, pressed Boehner hard, asking him if he really intended to scrap the deal and start again.

No, Boehner replied, he just wanted his members to have a voice. Obama then jumped in to turn the question on his rival: "What do you think of the [insurance] plan, John?" he asked repeatedly. McCain did not answer.

One Republican in the room said it was clear that the Democrats came into the meeting with a "game plan" aimed at forcing McCain to choose between the administration and House Republicans. "They had taken McCain's request for a meeting and trumped it," said this source.

Congressional aides from both parties were standing in the lobby of the West Wing, unaware of the discord inside the Cabinet room, when McCain emerged alone, shook the hands of the Marines at the door and left. The aides were baffled. The plan had been for a bipartisan appearance before the media, featuring McCain, Obama and at least a firm statement in favor of intervention. Now, one of the leading men was gone.

Link. I'll let it stand on its own, but for more acerb commentary, go here, and here.