While the Bush administration Monday pressed Capitol Hill leaders to move quickly and pass the $700 billion rescue plan for the financial markets, Democrats said they weren’t about to hand over a blank check with no strings attached. Any bailout could have ramifications on the already skittish energy markets.

Democrats are proposing that stricter oversight of financial institutions, protections for homeowners and limits on executive compensation be included in the legislative package to bail out Wall Street, which both the House and Senate are expected to take up this week. Also being floated is a proposal offered by Senate Banking Committee Chairman Christopher Dodd (D-CT) that would bar the Department of Treasury from buying any assets unless it receives “contingent shares” in the financial institution (seller) that are “equal in value to the purchase price of the assets.”

“We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome. Democrats will act responsibly to insulate Main Street from Wall Street,” said House Speaker Nancy Pelosi (D-CA).

Wall Street Traders were worried about the administration’s rescue plan. The Dow Jones Industrial fell 372.75 points Monday; Nasdaq tumbled 94.92 points; and the S&P 500 declined 47.98 points.

Energy market insiders, who watched the expiring October crude futures contract shoot more than $16/bbl higher on Monday (see related story), are taking a wait and see approach.

“The petroleum markets extended Friday’s rally in early trade Monday, as the $700 billion U.S. plan to provide a backstop for the financial sector led traders to bet on increased demand for crude oil,” said Tim Evans, an analyst with Citi Futures Perspective. “However, while investment bank traders may be feeling much more confident about their own status than a week ago, it remains to be seen whether this deal trickles down to create increased consumer demand and on what timeframe.”

Under the Bush administration’s bailout plan, which was sent to Congress over the weekend, Treasury “may, at any time, upon terms and conditions and at prices determined by the secretary, sell or enter into securities loans, repurchase transactions or other financial transactions in regard to any mortgage-related asset purchased under this act.” The funding is limited to $700 billion “outstanding at any one time,” and the bill would sunset in two years.

“The Senate Finance Committee is the watchdog of public debt, and with the $700 billion on the table you’d better believe we’re patrolling the yard for taxpayers…Main Street should not have to pay for the sins of Wall Street,” said Committee Chairman Max Baucus (D-MT). “I will work to include mechanisms in this bill that keep the burden of this bailout off taxpayers, mostly by making reasonable requirements of the companies asking for this emergency help.”

Dodd indicated Sunday that one approach being considered is including the bailout in the continuing resolution that Congress must pass before it adjourns to keep the federal government operating past Sept. 30, CQ Today reported. “We are working as expeditiously as we can to help stabilize the economy in a manner that protects taxpayers and promotes home ownership. The stakes could not be higher, and there is no time to waste, but I am hopeful that we will be able to achieve these important objectives.”

President Bush called on Congress to resist attempts to turn the emergency rescue plan into Christmas tree legislation, where lawmakers tack on so many provisions that it renders a bill impassable. “It would not be understandable if members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan,” Bush said Monday.

“Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants. Indeed, the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector and retirement accounts,” the president said.

“Working together, I am confident we can enact legislation necessary to prevent lasting damage to our economy.”

The economy was thrown into disarray last week as major investment banks on Wall Street, including Lehman Brothers Holdings Inc. and Merrill Lynch, either filed for bankruptcy or were swallowed up by other companies. The turmoil deepened when insurance giant American International Group Inc., teetering on the brink of bankruptcy, received an $85 billion loan from the federal government to keep it afloat. The only remaining large investment firms — Goldman Sachs and Morgan Stanley — have gotten the green light to convert into bank holding companies.

Baltimore-based Constellation Energy Group’s relationship with bankrupt Lehman Brothers and fears that it could lose its credit lines sparked a free fall in the electricity and natural gas supplier’s stock price last week. Berkshire Hathaway’s MidAmerican Energy Holdings Co. came to the rescue, agreeing to purchase all of the outstanding shares of Constellation Energy for $4.7 billion, or $26.50/share, in cash (see Daily GPI, Sept. 19).

MidAmerican Energy was expected to complete a $1 billion investment in Constellation Energy Monday (Sept. 22) as part of its bid to take over the energy company, according to a filing with regulators (see related story).

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