House rejects bailout plan
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.
"I don't know that we have the path forward at this point,” House Minority Leader John A. Boehner (R-Ohio), who pushed hard for the bill, said after the vote. "We need everyone to calm down."
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 Speaker Nancy Pelosi (D-Cal.) 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.
Nonetheless there were immediate recriminations on both sides. A switch of just 12 members would have reversed the outcome, and 95 Democrats, many 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."
President Bush and the two major candidates to succeed him in January, John McCain and Barack Obama, had all endorsed the 110-page bill, crafted in marathon talks over the weekend. Coming just five weeks before the November elections, the showdown posed a major test of whether the political center can 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 urged support for the package, which won endorsements Sunday from the two major candidates to succeed him, Republican John McCain and Democrat Barack Obama.
“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 Jones industrial average 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.”
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House rejects bailout plan
By DAVID ROGERS | 9/29/08 3:31 PM EDT
Updated: 9/29/08 3:31 PM EDT
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