Astronaut takes China's first spacewalk

• Story Highlights
• Chinese astronaut completes his country's first-ever spacewalk
  
• Zhai Zhigang waved small Chinese flag and later returned to spacecraft
  
• China successfully launched a three-man crew into space Thursday

BEIJING, China (CNN) -- A Chinese astronaut has completed his country's first-ever spacewalk as part of an ambitious program that is starting to rival the United States and Russia in its rapid expansion.

Zhai Zhigang waved to an external camera as he emerged from the hatch of the Shenzhou-7 spaceship on Saturday.

He later held a small Chinese flag, waving it in space.

Zhai returned to the interior of his capsule and closed the hatch after less than 20 minutes outside.

State broadcaster CCTV showed live images of Zhigang as he floated out of the orbiter module's hatch. "Greetings to all the people of the nation and all the people of the world," The Associated Press quoted him as saying. Watch as astronaut waves Chinese flag in space »

Fellow astronaut Liu Boming also emerged briefly from the capsule to hand Zhai the Chinese flag. The third crew member, Jing Haipeng, monitored the ship from inside the re-entry module.

The three-man crew launched from the Jiuquan Satellite Launch Center in northern China's Inner Mongolia Thursday for a three-day mission, the highlight of which was Saturday's spacewalk.

The spacewalk paves the way for assembling a space station from two Shenzhou orbital modules, the next major goal of China's manned spaceflight program. Watch as China's spacecraft lifts off »

China became the third country to send people into space in 2003, when military pilot Yang Liwei circled the earth for 21 hours.

Its second mission -- in 2005 -- had two crew members and lasted five days.

The latest mission has dominated front pages of China's state-controlled media, knocking aside coverage of China's continuing scandal involving contaminated milk.

Copyright 2008 CNN. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed. Associated Press contributed to this report.

MSNBC.com

WASHINGTON - President Bush scrambled Friday to bring rebellious members of his own party behind a multibillion-dollar government bailout of the financial system amid bitter political recriminations from both Democrats and Republicans over collapsed negotiations.

Bush said that the $700 billion rescue plan for the U.S. financial markets is needed and must be passed quickly. The legislative process “is sometimes not pretty,” Bush said.

Bush delivered a terse statement from outside the Oval Office of the White House, acknowledging that lawmakers have a right to express their doubts and work through disagreements, but declaring they must “rise to the occasion” and approve a plan to avert an economic meltdown.

“There are disagreements over aspects of the rescue plan,” he said, “but there is no disagreement that something substantial must be done. We are going to get a package passed.”

Earlier Friday, House Financial Services Chairman Barney Frank declared that an agreement depends on House Republicans “dropping this revolt” against the Bush-requested plan.

The Massachusetts Democrat said leading Democrats on Capitol Hill were shocked by the level of divisiveness that surfaced at Thursday’s extraordinary White House meeting, leaving six days of intensive efforts to agree on a bailout plan in tatters only hours after key congressional players of both parties had declared they were in accord on the outlines of a $700 billion bill.

Bush decided to speak, and also was in constant contact with Treasury Secretary Henry Paulson, who was returning to talks with lawmakers, White House press secretary Dana Perino said. Vice President Dick Cheney canceled planned travel Friday to New Mexico and Wyoming to remain in Washington and jawbone lawmakers.

And the campaign season’s first face-to-face debate between presidential candidates John McCain and Barack Obama, scheduled for Friday night, was still in doubt.

Bush’s renewed plea for quick passage of a plan to rescue troubled financial markets follows late-night talks on Capitol Hill that pitted Democrats against Republicans who are not going along with the president’s proposal.

On Thursday, the president hosted a historic meeting at the White House on the financial crisis. It included not only Hill leaders but presidential nominees John McCain and Barack Obama as well. But that meeting was divisive, and more talks will have to be held in Congress.

Earlier, U.S. House Speaker Nancy Pelosi said Friday that she expects lawmakers to reach agreement on a $700 billion Wall Street bailout package because “it has to happen.”

In an interview with ABC’s “Good Morning America,” Pelosi said she hoped lawmakers would reach final agreement within the next 24 hours so that the House and Senate could act on legislation this weekend.

But she said any agreement is up to Republicans who late Thursday revolted against the plan that congressional leaders were trying to negotiate with the White House.

Harsh Republican Party in-fighting sidetracked the Bush administration’s $700 billion plan to bail out the battered financial services industry, and it’s uncertain how many GOP lawmakers will even take part in Friday’s resumption of closed-door negotiations in Congress.

Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.

A White House summit meeting called principally with the purpose to seal the deal that President Bush has argued is indispensable to stabilizing frenzied markets and reassuring the nervous American public descended into arguments — mostly among Republicans.

The meeting revealed that Bush’s proposal to combat the worst financial crisis in decades had been suddenly sidetracked by fellow Republicans in the House, who refused to embrace a plan that appeared close to acceptance by the Senate and most House Democrats.

Treasury Secretary Henry Paulson begged Democratic participants not to disclose how badly the meeting had gone, dropping to one knee in a teasing way before U.S. House Speaker Nancy Pelosi to make his point according to witnesses.

Paulson reportedly pleaded Pelosi not to “blow it up” by withdrawing her party’s support for the financial rescue package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, according to a report in the New York Times, making a wry reference to Mr. Paulson’s kneeling, adding that “it’s not me blowing this up, it’s the Republicans.”

When Paulson hastily tried to revive talks in a nighttime meeting near the Senate chamber, the House’s top Republican refused to send a negotiator.

“This is the president’s own party,” said Rep. Barney Frank, a top Democratic negotiator who attended both meetings. “I don’t think a president has been repudiated so strongly by the congressional wing of his own party in a long time.”

By midnight, it was hard to tell who had suffered a worse evening, Bush or McCain. McCain, eager to shore up his image as a leader who rises above partisanship, was undercut by a fierce political squabble within his own party’s ranks.

The consequences could be worse for Bush, and for millions of Americans if the impasse sends financial markets tumbling, as some officials fear. Although talks were resuming Friday, it wasn’t clear how many House Republicans would participate.

Republicans and Democrats alike seemed unsure which way McCain was leaning. His campaign’s statement late Thursday shed little light.

“At this moment, the plan that has been put forth by the administration does not enjoy the confidence of the American people,” it said. It was unclear whether McCain would attend Friday night’s scheduled debate against Democratic nominee Barack Obama in Oxford, Miss.

Ordinarily a Republican president’s problems are with Democrats, especially if they control the House and Senate. In this case, Bush seemed almost over that hurdle.

To be sure, Democrats demanded a number of changes in his $700 billion bailout plan, but administration insiders signaled they probably were acceptable. They included greater oversight, more protections for taxpayers, efforts to head off home foreclosures and piecemeal allocations of the federal money to buy toxic mortgage securities.

What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Minority Leader John Boehner’s blessing.

Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them. Rep. Paul Ryan, R-Wisc., a chief sponsor, said it was clear that Bush’s plan “was not going to pass the House.”

But Democrats said the same was true of the conservatives’ plan. It calls for tax cuts and insurance provisions the majority party will not accept, they said.

At one point in the White House meeting, according to two officials, McCain voiced support for Ryan’s criticisms of the administration’s proposal. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan McCain favored.

These officials also said that as tempers flared, Bush struggled at times to maintain control.

At one point, several minutes into the session, Obama said it was time to hear from McCain. According to a Republican who was there, “all he said was, ’I support the principles that House Republicans are fighting for.”’

Some at the table took that to mean the conservatives’ alternative proposal, which stands little chance of passage.

A few hours later, Paulson and the handful of negotiators wearily headed for home. Frank told The Associated Press: “I did tell Secretary Paulson that this whole thing is at risk if the president can’t get members of his own party to participate.”

URL: http://www.msnbc.msn.com/id/26884523/

Market Dispatches9/23/2008 8:10 PM ET

Dow falls 162; Buffett buys into Goldman Sachs

MSNBC.com

To hear Henry M. Paulson Jr. and Ben S. Bernanke tell it, there is only one plan to save the economy -- use $700 billion in taxpayer money to take the worst of Wall Street's assets off its books.

But leading economists and financial thinkers argue that there are a host of alternatives that would reduce taxpayers' liabilities and perhaps more effectively address the urgent crisis in financial markets. Although these experts concede that the clock is ticking, they say different approaches have been dismissed too quickly.

While the government's plan is built around buying troubled assets, other options offer sharply different visions.

One approach seeks to reduce taxpayers' liability by offering collateral-backed loans to troubled banks, leaving them to work out their own solutions. Another idea is to have the government set up a profit-driven investment fund with the aim of infusing the financial system with cash without taking on bad debt. Still others suggest radically different tactics of directly helping homeowners by reducing mortgage principal or bolstering banks by suspending capital gains taxes.

The administration has said it is willing to negotiate key parts of its plan -- including a possible concession allowing the government to take equity stakes in financial firms in exchange for bailing them out -- but senior officials stand by the fundamental approach they have adopted to solve the crisis.

"They presented this as a comprehensive, decisive solution, but it's clearly not comprehensive and probably not decisive," said Simon Johnson, a former chief economist at the International Monetary Fund and a professor at Massachusetts Institute of Technology.

The cost of a mistake could be huge. It could result in a catastrophic collapse of the U.S. financial system that could ripple across the world or in a staggering clean-up bill for taxpayers. At the core of the debate is whether Paulson, the former chief executive of Goldman Sachs now charged with rescuing Wall Street as Treasury secretary, and Bernanke, the Federal Reserve chairman and one of the leading academics on financial crises, are serving up the best possible recipe for purging the U.S. financial system of billions of dollars worth of distressed mortgage-related debt.

Under the administration's rescue plan, the Treasury secretary would have broad discretion to buy up to $700 billion worth of troubled mortgage-backed assets and other securities that Wall Street firms have been struggling to sell. Administration officials hope that once those assets are cleansed, money will flow freely through the financial system once again and that the government can hold onto the securities until they recover some of their value.

In testimony on Capitol Hill yesterday, Bernanke and Paulson explained that they formulated their plan after considering past crises, from the U.S. savings-and-loan bailouts of the 1980s to the bursting of Japan's economic bubble a few years later. But they ultimately decided that the response to the current crisis needed to be a fast and massive fix.

"The situation we have now is unique and new," Bernanke said. He later continued, "The firms we're dealing with now are not necessarily failing, but they are contracting. They are de-leveraging. They're pulling back. And they will be unwilling to make credit available as long as these market conditions are in the condition they are."

Many of the alternatives fall under four basic approaches:

Government as lender
Critics of the administration's plan argue that an alternative could be crafted to minimize the exposure of the government -- and taxpayers -- to risk. Johnson, the MIT professor, suggested that the government, instead of taking on the bad debt, could offer loans to troubled banks, allowing them to put up their sickened portfolios of mortgage-backed debt as collateral.

This would give the banks access to badly needed cash at attractive interest rates set by the government. But it would not completely let them off the hook for making those bad investments in the first place. Because government money would come in the form of loans, rather an outright purchase of the risky investments, taxpayers would be offered greater protection. Ultimately, the banks would have to pay off the loans and take back the securities, though at a time when the market for them may have improved. If the value of the securities is still depressed, that would be the banks' problem, not the taxpayers'.

"The risk to the government/taxpayer is that the bank goes out of business and so isn't around to settle up," Johnson said. "But the government is also the regulator, and they can do a more forceful job of making sure the banks have enough capital, so the incentives are pretty well aligned."

Interest rates would be set at a level attractive to banks, the relatively low rate at which the Treasury borrows plus a small premium. Only if the banks were nearing default would the government take a more active role in propping them up, perhaps even taking them over outright.

Government as hedge fund
Some market analysts and fund managers worry that the Paulson plan would allow Wall Street to dump the worst kind of mortgage securities on the federal government. One solution could be the establishment of a fund that limits its purchases to profitable mortgage securities and other assets.

The creation of a $700 billion investment fund could help reinvigorate the business of trading mortgage securities, greasing the wheels of the credit markets by bringing in a new, cash-rich investor: the federal government. While this solution runs the risk of not cleaning up enough of the bad debt on firms' books, taxpayers could be more confident of getting their money back because the government would be selective about which securities it bought.

Mortgage breaks
Liberal thinkers say the government could intervene in the financial system by addressing the ailing mortgages at the heart of the crisis. Under this approach, the government could reduce the amount of principal that struggling homeowners owe.

"It's about foreclosures, stupid," said John Taylor, chief executive of the liberal National Community Reinvestment Coalition.

One idea is for the government to take control of some mortgage-backed securities -- most likely by buying them from financial firms -- and then work to restructure the underlying loans into something homeowners could afford. The value of the securities, both those bought by the government and those in private hands, could improve as foreclosures and late payments drop. If so, financial firms holding mortgage-backed securities could see a recovery in their balance sheets.

To make it fair for homeowners who keep up with their payments, borrowers who receive federal help would be required to give the government some of their gains if they eventually sell their homes for a profit.

But advocates of the idea acknowledge that it may take time to address the problems of millions of struggling homeowners. In the meantime, critics of this approach say the financial system could fall into chaos.

Tax breaks for Wall Street
Conservative analysts take a different tack, though their criticism of the Paulson plan has been no less sharp. They say that because the proposal forgives Wall Street for its past sins, it creates an incentive for investors to behave irresponsibly in the future.

Some of these thinkers complain that the government's rescue punishes taxpayers too severely for Wall Street's mistakes. They propose a cheaper alternative that calls for the repeal of the capital gains tax for two years, which would provide Wall Street a stimulus to reinvigorate the financial system.

Accounting rules that require banks to estimate the market value of their troubled mortgage securities would also be suspended for five years, giving financial firms the ability to value these assets at prices more reflective of the market before the panic gripped Wall Street.

Rep. Jeb Hensarling (R-Tex.) said this plan, which he announced on Capitol Hill yesterday, was still being finalized. Hensarling said the precise cost of the capital gains tax repeal, for instance, was still being determined.

"We agreed that inaction is not an option, but that doesn't mean that we've concluded that the Paulson plan is the only option," said Hensarling. "There are alternatives to consider, and we think we have a worthy one."

All of these alternatives try to get at the root of the turmoil facing the financial markets and the economy but in different ways. According to Lawrence Summers, former Treasury secretary, the government might have to try multiple approaches.

"If you have hypertension, you're way overweight and you're in the process of having a heart attack, what's your most fundamental problem? It's really not that useful to distinguish between them," Summers said at a Brookings Institute forum. "They're all components of the situation, and you're not going to get to a very satisfactory place unless you address all of them. That's how I think of our financial reality right now."

URL: http://www.msnbc.msn.com/id/26861562/