By Brian Friel, CQ Staff

The Senate’s top Democrat and Republican saved the 2008 financial industry bailout with a maneuver that only two confident insiders would dare propose. Although the House had rejected the $700 billion package amid complaints that it was too large, the Senate leaders made it even bigger.

Majority Leader Harry Reid and Minority Leader Mitch McConnell added $150 billion in tax breaks for individuals and businesses and a boost in mental health coverage, sweeteners that enticed the House to clear the package the second time around. The gambit headed off what then-Treasury Secretary Henry M. Paulson Jr. said would have been an economic catastrophe.

This week, Reid and McConnell will try it again. They are writing a fallback plan to increase the debt ceiling before Aug. 2 and avert what Treasury Secretary Timothy F. Geithner warns would be the nation’s default.

Although they seldom agree on anything in public, the party leaders have a productive behind-the-scenes relationship largely attributable to their personalities — neither is a fire-breathing ideologue — and to the nature of the Senate, where nothing can happen without cooperation.

House members decry the Senate as a place where legislation goes to die, and often it does because even the minority there can use procedures to stop a bill cold. But the inability of either side to impose its will in the Senate also encourages reasonableness and accommodation, as the chamber showed in breaking the deadlock on the 2008 bailout (PL 110-143).

The debt limit and deficit reduction strategy that top aides to Reid and McConnell are working to translate into legislative language is as counterintuitive as their bailout solution.

With talks between President Obama and congressional leaders at a standstill and Republicans insisting that a debt increase be coupled with tough spending cuts, it was McConnell who proposed on July 12 to give Obama the authority to raise the borrowing limit in three installments through 2012. The spending cuts Republicans had been demanding would not be required under McConnell’s proposal, although Reid and McConnell have been talking about creating a bicameral committee that would propose deficit reduction steps Congress would have to vote up or down on.

The Senate leaders’ collaboration at critical junctures belies their public partisanship, and the fact that on some occasions since assuming their current roles four years ago they have battled each other to stalemate.

At key moments, Reid and McConnell have shown a willingness to shift into the mode of pragmatic dealmakers, institutionalists with a deep understanding of the parliamentary obstacles facing legislation and the political trade-offs needed to get things done.

The leaders have met several times during recent weeks to discuss their concern that time was running out for a broad deficit reduction and debt ceiling deal, Reid disclosed.

“What we’re not going to be a party to in the Senate is a default,” said McConnell, R-Ky., last week, seeming to speak for the chamber as a whole, not just for Senate Republicans.

McConnell moved on his own to propose the fallback plan under which Congress could block debt limit increases only by overriding a presidential veto of a disapproval measure passed by both chambers.

The bailout deal in 2008 included a similarly unusual mechanism that required the president to request from Congress the second half of the $700 billion bailout authority, while setting an essentially unattainable threshold for Congress to deny the money.