Schumer takes plan, then makes it his own

Treasury Secretary Henry Paulson called it a “grave mistake” when Sen. Charles Schumer (D-N.Y.) first proposed scaling down the proposed $700 billion Wall Street bailout.

Yet two days later, Senate and House negotiators decided to do just that.

{mosads}The tentative compromise hashed out Thursday calls for sending $250 billion right away to troubled banks, with the balance coming later.

Phasing in payments to the distressed financial sector allowed Democrats to stamp their imprint on what until then had been known as the Paulson Plan, and smoothed the way for Senate Republicans to begin lining up in support.

It also gave Schumer another victory in his 10-year Senate career, in which, time and again, he has proven to be someone best not to underestimate.

As he has done repeatedly, Schumer found a way to put himself in the middle of the action and, more importantly, on the side with the most momentum.

“What Chuck has done is find a very clever way to enable us to accomplish the same goal [as Paulson], steady the markets and make it clear what our intent is, but to do so in a way that has our imprint,” said Sen. Tom Carper (D-Del.), Schumer’s colleague on the Senate Banking Committee.

“It’s a very smart compromise,” he added. “Folks in our caucus and in the Republican caucus were reluctant to accept verbatim what the administration had proposed.”

Even Republicans had praise for Schumer’s work.

Sen. Judd Gregg (N.H.), ranking Republican on the Senate Budget Committee, described Schumer’s role in the negotiations: “He makes the case and he makes it well. His role has been extremely constructive. Obviously, he has a philosophy, but he’s been working very hard to reach consensus here. ”

Schumer, who spent 18 years in the House, made a grand entrance to the Senate in 1998 by defeating longtime Republican Sen. Alfonse D’Amato and has shown a golden touch since.

Most notably, he engineered the Democrats’ retaking of the Senate majority in 2006. He took control of the Senate Democratic campaign committee in early 2005, raised more money than his Republican counterpart and, in November of 2006, helped Democrats capture six GOP seats. The accomplishment defied conventional wisdom and earned Schumer a special leadership post in the Senate created for him by Majority Leader Harry Reid (D-Nev.).

As for his latest triumph, Schumer said he didn’t expect his concept for the bailout to gain popularity so soon after Paulson panned it.

Schumer said he got the idea for splitting the bailout into phases after speaking to constituents and colleagues. He said the proposal became more attractive when Paulson couldn’t give him a good reason for why the money had to be doled out in a $700 billion lump sum.

“I asked why they had to have $700 billion at once and it was obvious that they didn’t have one — they couldn’t give a clear reason why they picked $700 billion and not $500 billion,” said Schumer.

“The best way to have strings attached and save taxpayer money was to do it a piece at a time,” he said.

It all began with a question and an unusual word Schumer used at the Senate Banking Committee hearing on Tuesday.

{mospagebreak}“What about doing this in tranches?” Schumer asked. “Why couldn’t you ask us for $150 billion and, on Jan. 15 or Jan. 20, we would come back, we’d assess how this worked, and grant some more money if it’s really working?”

Paulson’s response was unequivocal: “I think that would be a grave mistake.”

Reid liked Schumer’s idea, though not entirely.

“I hate the word ‘tranche,’ ” Reid grumbled Wednesday afternoon, noting at the same time that the concept had gained momentum in the Democratic Conference. “It’s worth following.”

{mosads}Schumer said Reid didn’t like the word because the leader didn’t think people would understand it.

“We’re now trying to call it installments, but ‘tranche’ is such a fun word to say,” Schumer quipped the following day.

But Paulson still isn’t smiling. Schumer said Paulson was resisting the idea of receiving the bailout money in installments as of Thursday afternoon. Congressional negotiators planned to present him with the details of their proposal later in the day.

“When I proposed it, I was trying to think of ways to protect taxpayers. I was surprised how it took off on its own,” Schumer said.

Republicans praised Schumer’s role in developing the proposal to grant the bailout money in installments.

The plan began to gain momentum on Wednesday afternoon among Republicans such as Sens. Sam Brownback (Kan.) and Bob Corker (Tenn.), who discussed the bailout during an afternoon Steering Committee meeting.

Gregg, who participated in the negotiations Thursday morning, said he wouldn’t mind giving Paulson all $700 billion “up front.”

But he acknowledged that requiring the Treasury secretary to return to Congress to ask for installments — thus giving lawmakers more of a chance to oversee the program — made the bailout more politically attractive to colleagues.

“That becomes a better political event for some people, and that’s the direction we’re heading in,” said Gregg, who said Schumer helped.

J. Taylor Rushing contributed to this article.