Senators Seek Compromise on Iraqi Loans

A handful of Democratic and Republican senators defied President Bush Wednesday and neared agreement on an amendment to make part of a $20.3 billion Iraqi aid plan a loan.

The behind-the-scenes bipartisan effort came as the House and Senate debated similar $87 billion bills financing U.S. military action and reconstruction in Iraq (search) and Afghanistan (search).

Bush has insisted that the $20.3 billion he wants to reconstruct Iraq's electric system, postal service and other economic and government institutions must be in the form of grants rather than loans. Making the money a loan would feed suspicions that the United States wants to control Iraq's huge oil reserves, the administration and its congressional allies said.

To try snuffing out the move toward loans, Bush sent Vice President Dick Cheney and Secretary of State Colin Powell to lobby GOP senators at their weekly lunch. Even so, with record federal deficits making lawmakers wince over the amount of Iraqi aid, Senate Majority Leader Bill Frist, R-Tenn., seemed less than certain that the White House effort would succeed.

"I'm not overly confident, but I think people will listen" to arguments about the need for grants, not loans, Frist said.

The bipartisan group of senators circulated a draft amendment making $10 billion of the package a loan to be converted to grants if Saudi Arabia, Russia, France and other countries forgive 90 percent of the money they are owed by Iraq. That debt has been estimated to be about $120 billion, plus about $80 billion more in war reparations owed by Saddam Hussein's government after its invasion of Kuwait in 1990.

The senators apparently dropped language turning the loans into grants for each dollar of aid pledged by donor countries meeting in Madrid next week.

Sen. Ben Nelson, D-Neb., said he and other pro-loan senators hoped to have their amendment ready by Thursday. The money would be loaned to the U.S.-picked Iraqi Governing Council (search) or whatever Iraqi government is recognized as its successor.

"The loan is there to give an incentive to the holders of prewar debt to forgive their loans, and then we will forgive ours," he said.

Lawmakers and aides said the senators involved included Evan Bayh, D-Ind.; Saxby Chambliss, R-Ga.; Susan Collins, R-Maine; Lindsey Graham, R-S.C.; Kay Bailey Hutchison, R-Texas; John Ensign, R-Nev.; and Olympia Snowe, R-Maine.

It was unclear how the bipartisan loan amendment would fare in the Senate, where the White House was working for its defeat.

"Obviously the White House is not on board with us, so that makes it difficult," Chambliss said.

Hutchison had been promoting an amendment to put half of the $20.3 billion into a loan fund run by the World Bank (search). But Wednesday she said it was "all in flux."

As House debate began, Minority Leader Nancy Pelosi, D-Calif., said for the first time that she would oppose the bill on final passage, saying it was time to hold Bush accountable for "his failed policy" in Iraq.

"American soldiers are taking virtually all the risks and the American taxpayers are paying virtually all the bills," she said.

House Majority Leader Tom DeLay, R-Texas, said the final vote would be "a test of our national resolve to finish the hard work of winning the war on terror."

House and Senate leaders were expecting to finish their separate versions of the overall bill by Friday. Their hope is to write a House-Senate compromise that Congress can send to Bush for his signature by next week, before the Oct. 23 and 24 donors' conference in Spain.

During Wednesday's debate, the Senate:

— Accepted by voice vote an amendment by Ensign to reduce U.S. aid to Iraq for every dollar of foreign debt run up by Saddam Hussein's regime that is paid off. The amendment was aimed at preventing the use of U.S. taxpayers' money to repay Saddam's loans.

— Gave initial approval, 52-45, to an amendment by Sens. Jack Reed, D-R.I., and Chuck Hagel, R-Neb., to use $409 million in the bill for next year for the Army to increase its size by 10,000 troops. The proposal was opposed by the administration and GOP Senate leaders, and a second vote on the issue was possible.

— Voted 97-0 for an amendment by Sen. Robert Byrd, D-W.Va., requiring the U.S.-run Coalition Provisional Authority now governing Iraq to give Congress quarterly reports on how rebuilding funds are being spent.