Despite an afternoon announcement that an agreement was near on the Bush Administration proposal to bailout the financial services industry, by yesterday evening the entire process had been blown up by House Republicans. The apparent agreement reached in the afternoon was described by the Washington Post this way:

During a nearly three-hour meeting, lawmakers reached an “agreement on principles.”

Under that agreement, the package would be broken into three parts. Paulson would receive $250 billion immediately and $100 billion more upon certification that the funds are necessary. The final $350 billion could be dispersed without additional congressional approval, but Congress would be given 30 days to object.

But a short time after word of a prospective deal leaked out House Republicans repudiated the central tenets involved.

Less than 30 minutes later, however, Rep. Spencer Bachus (R-Ala.), who had attended the meeting on behalf of House Republicans, denied that an agreement had been reached. While progress was made on peripheral issues, Bachus said, House Republicans remained adamantly opposed to the central point of the plan: purchasing bad assets from struggling firms.

“There’s not a deal. There’s not a deal made. There was progress on the issues,” Bachus told reporters. He said House Republicans “would prefer a loan where we fix an interest rate or we would prefer insurance” rather than having the government buy up bad assets.

Bachus said many of those ideas were supported by McCain, who returned to Washington yesterday to participate in the negotiations. Bachus said he spoke to McCain on Wednesday, had breakfast yesterday with two McCain advisers and spoke to McCain again immediately after the morning meeting.

But, Bachus said, “John’s not trying to call the shots for the House caucus, I can tell you that. He’s just opposed to the plan in its present form.”

So McCain was for the plan before he was against it.

President Bush, looking to put the deal back together, hosted a meeting at the White House attended by a bipartisan group of Congressional leaders, as well as Senators McCain and Obama. After the photo-op that meeting broke down into a shouting match, as House Republican Leader Hohn Boehner floated a new proposal.

Democrats accused Boehner of acting on behalf of GOP presidential candidate Sen. John McCain (Ariz.) in trying to disrupt a developing consensus. The new proposal also displeased White House officials, including Treasury Secretary Henry M. Paulson Jr., who chased after Democrats leaving the meeting and — half-jokingly — dropped to one knee and pleaded with them not to “blow up” the $700 billion deal, according to people present at the meeting.

When meeting participants demanded to know McCain’s position he simply said he supported the principles outlined by House Republicans. McCain seems to have at least in part blown up the process that he claims he came in to save on a “bipartisan basis”. The potential for real gridlock exists here, with political games apparently more important than real solutions. Maybe if McCain leaves Washington and goes to the debate the consensus that appeared before his arrival will return.