WASHINGTON — The seeds of the House Republican revolt over the financial industry bailout were sown in an e-mail message circulated Monday night as internal animosity built quickly over the Bush administration’s request for $700 billion to prevent an economic collapse.
In a message to members of the conservative Republican Study Committee, leaders of the bloc of more than 100 lawmakers solicited ideas, calling for a “free-market alternative to the Treasury Department’s proposal so that, regardless of how individual R.S.C. members vote on final passage, House conservatives have something to be for.”
As the week progressed, it became abundantly clear that one thing conservative Republicans were most certainly not for was the Treasury plan, prompting them to begin searching for an alternative to avoid the perception of strictly being naysayers.
By the end of Friday, at least a portion of their alternative seemed likely to be included in the broader proposal as a sweetener for Republicans, although closed-door negotiations continued into the evening on Friday, and the contours of the final package remained in limbo.
After years of acceding to the White House on a variety of initiatives despite deep misgivings, House Republicans found the administration’s latest proposal to be too much to swallow.
Just as they were trying to reassert themselves as a party of fiscal restraint, President Bush, on his way out the White House door, was asking them to sign off of on a $700 billion bailout built on taxpayer dollars, with very few questions allowed.
“You were being asked to choose between financial meltdown on the one hand and taxpayer bankruptcy and the road to socialism on the other and you were told do it in 24 hours,” Representative Jeb Hensarling of Texas, head of the conservative group, said. “It was just never going to happen.”
As they dig in against the White House, House Republicans are drawing strength and encouragement from outside critics of the bailout, like former Speaker Newt Gingrich and the Club for Growth, a conservative economic group known for financing primary challenges against apostate Republicans.
Richard Viguerie, the longtime conservative leader, on Friday heralded House Republicans for guarding against “this total cave-in by President Bush and the Senate Republicans.”
The resistance caps two years of frustration among House Republicans after losing the majority in 2006. They believe they have suffered serious mistreatment at the hands of the Democrats and that they have been marginalized in legislative negotiations since they, unlike their Senate counterparts, do not have the procedural weapons to force their way to the negotiating table.
They also complain that Treasury Secretary Henry M. Paulson Jr. has been too quick to bargain mainly with Democrats, led by the House Speaker, Nancy Pelosi of California, and Representative Barney Frank of Massachusetts, not only on this plan but on the stimulus proposal earlier this year, a subsequent housing bill and other economic measures.
The Monday e-mail message, which led to a statement of principles that many other conservatives embraced, became their manifesto. By Thursday, a legislative alternative was circulating, one centered on federal insurance for mortgage assets combined with tax cuts on investment gains. When Representative John A. Boehner of Ohio, the Republican leader, put that alternative on the table at the White House on Thursday afternoon, a verbal brawl broke out, scuttling a grand compromise and forcing negotiators back to the table.
With the blessing of Mr. Boehner, the plan was promoted by a troika made up of Mr. Hensarling along with Representative Eric Cantor of Virginia, a major fund-raiser and a rising star in the Republican ranks, and Representative Paul Ryan of Wisconsin, who is seen as one of the sharpest economic minds in the Republican conference.
The legislative alternative, combined with anger at their vastly reduced power on Capitol Hill and fueled by an internal power struggle , has made House Republicans suddenly relevant again. They have become the chief impediment to speedy approval of a bailout plan, because Democrats say they will not push one through on their own.
It represents a risky approach, raising the prospect that Republicans could be blamed if the bailout collapses and the markets plunge. But they could also claim victory if some of their plan is incorporated into the final product and it generates Republican support — still a large question mark as negotiations continued. Democrats and the Treasury Department both say the Republican plan is flawed and unworkable.
Recognizing the prospect that a failure could be attributed to them, Republicans took pains Friday to make it clear they recognized some government intervention was necessary, just not the sort sought by the White House. And Representative Roy Blunt of Missouri, the No. 2 House Republican, was tapped to serve as an official emissary to the negotiations.
Mr. Cantor acknowledged, “People want to see a deal made, no question about it.”
Yet, at the same time, it was becoming quite obvious that some House Republicans no longer saw themselves as an extension of the Bush White House.
For example, in advance of the president’s speech Wednesday, Representative Thaddeus McCotter of Michigan, a member of the Republican leadership, sent out this statement expressing his pique: “Who’s giving the Republican response?”
The revolt surprised many because the Republican leadership of the House and Senate initially appeared to be solidly in Mr. Paulson’s corner. Participants at last week’s meeting between the leadership and administration economic advisers said Mr. Boehner was among those most willing to endorse a drastic intervention, a position he emphasized in a later television interview, calling for speedy action.
But he began rolling back as the negotiations moved ahead and was adamant, after the Thursday announcement of a deal in principle, that there was no deal he had blessed. By Thursday night, he had moved behind the Republican alternative, demanding it get a hearing.
Aides to Mr. Boehner said he was motivated partly by what he saw as a political effort by Democrats to seal a deal before Senator John McCain, the party’s presidential candidate, could have a say in talks when he arrived Thursday.
On Friday, when House Republicans met to review the state of play, Mr. Boehner received a standing ovation at the Republican meeting in tribute to his decision to balk at the plan.
“Republicans say they believe they stand to be rewarded for forcing closer review of the bailout. They say Democrats can always pass the Treasury plan on their own.
“If Democrats believe the only plan that will save the economy is the Paulson plan, they have the power and the moral responsibility to go ahead and pass it,” said Mr. Hensarling. “They don’t have to have Republican votes to get it done.”