Treasury’s $700 billion Wall Street rescue plan collapsed in the House, sending a shock through financial markets and leaving the Bush Administration scrambling to find some new way to deal with the credit crunch facing the American economy.
The president said he was “disappointed” with the vote and vowed that his administration would “continue to address this economic situation head on.” But House Minority Leader John A. Boehner (R-Ohio) – who pushed hard for passage – warned that there was no obvious “path forward” and said, “We need everyone to calm down.”
Calm was nowhere to be found on Wall Street or on Capitol Hall. The Dow Jones Industrials Average was down more than 600 points at one point, and the House chamber turned into a scene of chaos and confusion after a tumultuous and emotional vote.
"The legislation has failed ,but the crisis is not going away," said Speaker Nancy Pelosi (D-Calif.).
Republican defections proved fatal to the massive government intervention, rejected 228-205. Despite bipartisan appeals from the leadership, anti-Wall Street sentiment and the huge scale of the proposed government intervention proved too much for Treasury to prevail.
Democrats more than delivered a majority of their caucus, and Pelosi held the vote open to bring her numbers up to 140 votes for the package. But Republicans never topped 70, and the final GOP split was 133 against the bill and only 65 for the measure.
There were immediate recriminations on both sides. A switch of just 12 members would have reversed the outcome, and 95 Democrats, many from the left wing of the party, contributed to the defeat.
After the vote, Republicans claimed that the Democratic leadership had been warned that fewer than 60 Republicans would vote for the bill. Democrats denied the claim, saying they never would have brought the bill to the floor if they had been told there was so little Republican support.
“We delivered our votes,” Rep. Rahm Emanuel (D-Ill.) said.
"I guess the Republican leadership is so weak John Boehner couldn't deliver 50 percent of the votes,” sneered Rep. David Obey (D-Wis.) “I thought these were big boys."
Republicans said Pelosi may have lost votes with a floor speech they considered too partisan. "We could have gotten it if it were not for this partisan speech that Speaker Pelosi gave,” Boehner said.
Added Rep. Chris Shays, a Connecticut Republican who also voted for the bill: “Nancy blew it.”
"That is an absurd accusation at a time when our country is in deep economic distress," a Pelosi spokesman fired back."You don't vote on a speech, you vote on a bill."
Financial Services Chairman Barney Frank (D-Mass.), a key negotiator on the bill, mocked the Republicans for blaming Pelosi, saying he would be "uncharacteristically nice" to a dozen Republicans if it meant they would back the package.
"I'm ready to work ... I still feel it's important for the country to come up with some legislation to address the credit crisis," Frank said.
The presidential candidates weighed in, yet offered stark differences in outlooks. John McCain campaign advisor Douglas Holtz-Eakin said the bill failed “because Barack Obama and the Democrats put politics ahead of country." Obama, in a speech in Colorado, took a cooler approach, saying, "There are going to be some bumps and trials and tribulations and ups and down before we get this rescue package done."
McCain, Obama and President Bush had each endorsed the 110-page bill, crafted in marathon talks over the weekend.
Coming just five weeks before the November elections, the House showdown posed a major test of whether the political center could hold in the face of the threats to the larger U.S. economy.
But it was equally true that sober individuals — like Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke — had recommended a course asking nervous lawmakers to absorb serious political risks. And with world financial markets watching, the whole run-up to the vote Monday became a gamble itself, a “no-standing-still, no-turning-back, go-for-broke” political exercise that has now led to a huge defeat.
In the final day, Bernanke — perhaps the clearest voice in expressing the intent of the intervention — was enlisted to make calls to lawmakers, along with President Bush. And after a lengthy meeting of House Republicans on Sunday evening, Treasury had hoped that the party was beginning to come together behind its leadership.
“Colleagues, we’re in this moment, and if we fail to do the right thing, heaven help us,” said Rep. Paul Ryan (R-Wis.), an early critic who had since swung behind the measure.
But fellow Midwesterners, like Rep. Judy Biggert, an Illinois moderate, still rose in opposition. And Shays warned: “For this to pass, a lot of people are going to have to change their minds.”
In the end, they didn’t.
“In my heart and in my mind, I believe that this plan is fraught with unintended consequences, would force generations of taxpayers to pick up the tab for Wall Street losses and could permanently and fundamentally change the role of government in the American free enterprise system,” said Rep. Jeb Hensarling (R-Texas), who led conservatives away from Bush and their own party leaders. “Once the government socializes losses, it will soon socialize profits. If we lose our ability to fail, we will soon lose our ability to succeed. If we bail out risky behavior, we will soon see even riskier behavior."
Speaking from the lawn of the White House, Bush had urged support for the package.
“I know many Americans are worried about the cost of the bill, and I understand their concern,” Bush said. But citing a new report from the Congressional Budget Office Sunday night, the president predicted that “much — if not all” of the $700 billion will be paid back, and he cast the question as a bipartisan step to help the economy.
“Congress can send a strong signal to markets at home and abroad by passing this bill promptly,” the president said. “Every member of Congress and every American should keep in mind: A vote for this bill is a vote to prevent economic damage to you and your community.”
But the Dow was down early Monday in anticipation that the bill could be in trouble, and the news that Wachovia Corp., facing big losses, would be acquired by Citigroup Inc. in a deal facilitated by the Federal Deposit Insurance Corp. added to the tensions.
The massive intervention, like the crisis itself then, required everyone to go into uncharted waters. And in crafting the bill, lawmakers found themselves scared by what they were asked to do, even as they were trying to calm frightened markets.
“There is some tension between the needs of the members and the needs of the markets,” House Financial Services Committee Chairman Barney Frank (D-Mass.) said of his partnership with Paulson “He thinks neurosis on the part of the markets deserves more credibility than neurosis on the part of elected officials and getting a bill passed.”
Martin Kady II, Patrick O’Connor and John Bresnahan contributed to this story.
The president said he was “disappointed” with the vote and vowed that his administration would “continue to address this economic situation head on.” But House Minority Leader John A. Boehner (R-Ohio) – who pushed hard for passage – warned that there was no obvious “path forward” and said, “We need everyone to calm down.”
Calm was nowhere to be found on Wall Street or on Capitol Hall. The Dow Jones Industrials Average was down more than 600 points at one point, and the House chamber turned into a scene of chaos and confusion after a tumultuous and emotional vote.
"The legislation has failed ,but the crisis is not going away," said Speaker Nancy Pelosi (D-Calif.).
Republican defections proved fatal to the massive government intervention, rejected 228-205. Despite bipartisan appeals from the leadership, anti-Wall Street sentiment and the huge scale of the proposed government intervention proved too much for Treasury to prevail.
Democrats more than delivered a majority of their caucus, and Pelosi held the vote open to bring her numbers up to 140 votes for the package. But Republicans never topped 70, and the final GOP split was 133 against the bill and only 65 for the measure.
There were immediate recriminations on both sides. A switch of just 12 members would have reversed the outcome, and 95 Democrats, many from the left wing of the party, contributed to the defeat.
After the vote, Republicans claimed that the Democratic leadership had been warned that fewer than 60 Republicans would vote for the bill. Democrats denied the claim, saying they never would have brought the bill to the floor if they had been told there was so little Republican support.
“We delivered our votes,” Rep. Rahm Emanuel (D-Ill.) said.
"I guess the Republican leadership is so weak John Boehner couldn't deliver 50 percent of the votes,” sneered Rep. David Obey (D-Wis.) “I thought these were big boys."
Republicans said Pelosi may have lost votes with a floor speech they considered too partisan. "We could have gotten it if it were not for this partisan speech that Speaker Pelosi gave,” Boehner said.
Added Rep. Chris Shays, a Connecticut Republican who also voted for the bill: “Nancy blew it.”
"That is an absurd accusation at a time when our country is in deep economic distress," a Pelosi spokesman fired back."You don't vote on a speech, you vote on a bill."
Financial Services Chairman Barney Frank (D-Mass.), a key negotiator on the bill, mocked the Republicans for blaming Pelosi, saying he would be "uncharacteristically nice" to a dozen Republicans if it meant they would back the package.
"I'm ready to work ... I still feel it's important for the country to come up with some legislation to address the credit crisis," Frank said.
The presidential candidates weighed in, yet offered stark differences in outlooks. John McCain campaign advisor Douglas Holtz-Eakin said the bill failed “because Barack Obama and the Democrats put politics ahead of country." Obama, in a speech in Colorado, took a cooler approach, saying, "There are going to be some bumps and trials and tribulations and ups and down before we get this rescue package done."
McCain, Obama and President Bush had each endorsed the 110-page bill, crafted in marathon talks over the weekend.
Coming just five weeks before the November elections, the House showdown posed a major test of whether the political center could hold in the face of the threats to the larger U.S. economy.
But it was equally true that sober individuals — like Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke — had recommended a course asking nervous lawmakers to absorb serious political risks. And with world financial markets watching, the whole run-up to the vote Monday became a gamble itself, a “no-standing-still, no-turning-back, go-for-broke” political exercise that has now led to a huge defeat.
In the final day, Bernanke — perhaps the clearest voice in expressing the intent of the intervention — was enlisted to make calls to lawmakers, along with President Bush. And after a lengthy meeting of House Republicans on Sunday evening, Treasury had hoped that the party was beginning to come together behind its leadership.
“Colleagues, we’re in this moment, and if we fail to do the right thing, heaven help us,” said Rep. Paul Ryan (R-Wis.), an early critic who had since swung behind the measure.
But fellow Midwesterners, like Rep. Judy Biggert, an Illinois moderate, still rose in opposition. And Shays warned: “For this to pass, a lot of people are going to have to change their minds.”
In the end, they didn’t.
“In my heart and in my mind, I believe that this plan is fraught with unintended consequences, would force generations of taxpayers to pick up the tab for Wall Street losses and could permanently and fundamentally change the role of government in the American free enterprise system,” said Rep. Jeb Hensarling (R-Texas), who led conservatives away from Bush and their own party leaders. “Once the government socializes losses, it will soon socialize profits. If we lose our ability to fail, we will soon lose our ability to succeed. If we bail out risky behavior, we will soon see even riskier behavior."
Speaking from the lawn of the White House, Bush had urged support for the package.
“I know many Americans are worried about the cost of the bill, and I understand their concern,” Bush said. But citing a new report from the Congressional Budget Office Sunday night, the president predicted that “much — if not all” of the $700 billion will be paid back, and he cast the question as a bipartisan step to help the economy.
“Congress can send a strong signal to markets at home and abroad by passing this bill promptly,” the president said. “Every member of Congress and every American should keep in mind: A vote for this bill is a vote to prevent economic damage to you and your community.”
But the Dow was down early Monday in anticipation that the bill could be in trouble, and the news that Wachovia Corp., facing big losses, would be acquired by Citigroup Inc. in a deal facilitated by the Federal Deposit Insurance Corp. added to the tensions.
The massive intervention, like the crisis itself then, required everyone to go into uncharted waters. And in crafting the bill, lawmakers found themselves scared by what they were asked to do, even as they were trying to calm frightened markets.
“There is some tension between the needs of the members and the needs of the markets,” House Financial Services Committee Chairman Barney Frank (D-Mass.) said of his partnership with Paulson “He thinks neurosis on the part of the markets deserves more credibility than neurosis on the part of elected officials and getting a bill passed.”
Martin Kady II, Patrick O’Connor and John Bresnahan contributed to this story.
4 comments:
To be quite honest, I am quite concerned with the present state of the economy. Even though gas prices are dropping, there is no money to buy gas. The citizens of the United States need to convince their leaders to doing "something". Everyone is loosing money and those who are in the stock market are diminished. Everything that is presently occurring in Washington DC is basically like Kindergarten. Everyone is playing the blame game and absolutely no one is accepting responsibility for their actions. I personally blame this on the banks and the federal government. There should have been more regulation for those who wanted to take out loans. What happened to the old fashion credit checks? The banks should have paid more attention to those that were taking out loans. Like Mr. Perry said, everyone was basically money hungry and did not stop the loans. Everyone was taking a profit, but no one stopped to see the repercussions that would soon follow. The Republicans should side with their president, I mean come on they are on the same side here. Everyone needs to grow up and look for a solution fast. I personally think that we should have a bailout and start completely new. Everyone might disagree, but its better than taking chances with our future.
The rejection of this bailout was a big surprise to me, and of course, many others. With McCain asking to take away time from the presidential campaigning to help the country, and then having it be a total blowout will come back to bite him in the election. “...they never would have brought the bill to the floor if they had been told there was so little Republican support.” The little support from Republicans was surprising, again, with McCain’s determination to get involved. Obama didn’t seem to like the involvement, and didn’t show much disappointment in the rejection… “There are going to be some bumps and trials and tribulations and ups and down before we get this rescue package done." The problem now is what are we going to do solve this economic crisis? President Bush said it well…“Every member of Congress and every American should keep in mind: A vote for this bill is a vote to prevent economic damage to you and your community.” Now with this bill done away with, it is important for this country to come up with some way to address this crisis, or we’ll be stuck in even riskier situations trying to clean this mess up. With the stock market steadily going under, it is looking more and more like another great depression. Hopefully things will change before that comes about.
I have to agree with Andrew that I was very suprised that the bill was rejected. However, if the bill gets voted on again I wouldn't be suprised if it passes. I believe that the worse our economy gets the more likely it will be that this bill will get passed. Even though our economy is dying, I don't think it is likely for us to go into a depression; unless some major national catastrophy occurs...
I read an article on the TIME webpage and it talked about how little support the “Bailout Plan” is receiving from the American people. Honestly, I think the way the Gov is presenting it, is the problem. They make it very complicated and unspecific. The name itself, “bailout” makes it sound as if the breaks are being given to financial institutions and not to the consumer. Bush promises that the money will be returned to the tax payers over time, but a promise from him doesn’t hold much weight either. One of my main problems is how unspecific they are. I know it is an uncertain circumstance and that lawmakers themselves are in uncharted territory, but if I’m supposed to put my faith in the Gov to solve this problem, then I would like to trust they know what they’re doing. All specifics are discussed behind closed doors and what’s put in the media is an outline, but no real details. “On Sept. 18, they warned congressional leaders what inaction would bring: a stock-market crash, sky-high unemployment, Americans unable to get car loans, banks failing so fast that they would quickly drain the federal deposit insurance fund and people's life savings. Paulson did not use those words when he went on TV a few days later…” TIME. A real, honest, statement would be nice, not all this sugar coated media crap. They justify it by saying it would cause a financial scare, but maybe that’s better than inactivity because I believe the people won’t support it unless, they know the real seriousness of the situation. Another thing I wanted to address was the Republicans’ choice not to agree to the plan. I see it as going both ways, it’s bad in the respect that Congress can’t make a hasteful decision when it’s obviously needed, but I see it as a good thing as well in the fact that it checks and balances the beliefs of the democrats and represents pretty much 99% of the populous. I agree with the suspicion that it “could permanently and fundamentally change the role of government in the American free enterprise system” and also the fact that “if we bail out risky behavior, we will soon see even riskier behavior.” No matter what your views, the bailout is a risk and I myself am not sure if I believe we should take that risk. On one side our economy is obviously floundering and in need of help, but on the other I know for every low there is a high and vice versa and those are just the realities of a free market economy. Even though this current crisis doesn’t really apply to me, as a future tax payer and homeowner who’s finances will be affected by this “bailout plan”, I hope it turns out for the betterment of the American economy.
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