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 SATURDAY, JULY 4, 2009 12:08 am |
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Nation & World 
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Lawmakers scramble after bailout bill is rejected WASHINGTON -- A bipartisan rebellion in the House killed a $700 billion rescue plan for the nation's financial system Monday, sending global stock prices plunging and dealing President Bush his worst legislative defeat.Democratic leaders said the House would reconvene Thursday, leaving open the possibility that it could salvage a reworked version. Senate leaders showed no inclination to try to bring the measure to a vote before they could determine its fate in the House. Bush, meanwhile, was scheduled to make a statement on the rescue plan this morning, the White House said. After U.S. financial markets closed, with the Dow Jones industrial average down a one-day record 777.68 points, or 7 percent, Treasury Secretary Henry Paulson tried to calm frazzled traders, assuring them that work on a market intervention would resume. "I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy," he said. "We've got much work to do, and this is much too important to simply let fail." Market jitters spread around the globe Rarely has a congressional vote held such high drama and produced such immediate repercussions, directly from the House floor to the trading floor. Wall Street traders huddling around television screens watched lawmakers denounce the bailout legislation, and then sent the Dow plummeting. Stocks had recovered somewhat by the time the vote was gaveled to a close, but jittery investors sent them plunging again as Republicans and Democrats took turns blaming one another for the defeat. In a few hours, $1.2 trillion in paper wealth was wiped out. The shockwaves of the House defeat are expected to rock world markets this morning. All major stock markets in Asia tumbled sharply early today. Already, the carefree attitude that international bankers had been taking has begun to give way, with the European Central Bank moving an extra $173 billion into European markets Monday. Political risks in mind In the face of thousands of phone calls and e-mails fiercely opposing the measure, many lawmakers were not willing to take the political risk of voting for it just five weeks before the elections. On the 205-228 congressional vote, 140 Democrats voted yes and 95 voted no; 133 Republicans opposed it, while 65 approved. "The Democratic side more than lived up to its side of the bargain," said House Speaker Nancy Pelosi, D-Calif. House Minority Whip Roy Blunt, R-Mo., said of the Democrats: "We're going to reach back out to them. We're going to be talking to our members and see how we can come together in the next few days to reverse whatever negative impact there may be in the economy over the next few days because Congress has failed to act." On Monday, Bush called nearly every member of Texas' Republican delegation, GOP aides said. He reached four of the 19. The legislation the administration promoted would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and ease one of the biggest choke points in a national credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy, which is already sputtering. Leaders weigh next moves Congressional leaders and the White House faced several options, none of them palatable just weeks before a heavily contested presidential election. Democratic leaders could choose to return with a measure guaranteed to win more Democratic votes, even at the expense of Republican support. Instead of simply purchasing distressed assets from financial institutions, some Democratic economists favor injecting lenders with cash in exchange for stock, letting the institutions figure out what to do with the mortgage-backed securities and other troubled assets weighing down their books. A Democratic bill would also include more money for homeowners in or facing foreclosure and would change the bankruptcy law to allow judges to adjust mortgage repayment terms. But Democratic leaders would have to ensure that the measure could survive a filibuster in the Senate and would be signed by the president. Republicans were advocating slight changes to the bill that could attract a handful of new votes. Party members might be enticed by a measure that would allow businesses to write off more past losses on this year's taxes or a more robust expansion of mortgage insurance, financed by banks. Democrats could add more assistance to ailing state and local governments without raising too many GOP objections. If a version of the bill doesn't ultimately pass, the Fed and the Treasury would have little choice but to return to their strategy of the past 14 months: making case-by-case decisions about the fates of individual firms, on the fly, using existing powers to try to contain the crisis. The blame game In the thick of the presidential campaign, the collapse of the deal left Washington buzzing with recriminations. Republicans -- from Sen. John McCain's top economic aide to the House GOP leadership -- initially blamed Pelosi, saying her floor speech castigating Bush administration "policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system" poisoned the atmosphere and invited partisan retribution. In truth, few Republicans were on the floor to hear that speech, and those who were there showed no signs of discomfort, as they often do. Republican leaders backed away within hours, conceding they never had the votes they had promised. Democrats found strength in numbers, saying nearly two-thirds of their members voted for the bill. If anyone is to blame for a record sell-off on Wall Street, Democrats said, it was the party that provided just 65 votes. For Bush, the defeat was the starkest sign yet that a president who once had lockstep support among congressional Republicans has all but lost his influence. He has had vetoes overridden, on a water projects bill and a major agriculture measure, but nothing to compare with the defeat of a measure he had said was critical to the nation's economy. In the days before the vote, the presifdent addressed the nation about the urgency of the plan, spoke out daily, even summoned congressional leaders and the two presidential candidates to the White House. The divisions in both the Republican and Democratic ranks that had bedeviled negotiators simply could not be mended that easily. House Republican leaders acknowledged they let Pelosi put the bill on the floor with at least a dozen Republican votes still needed. But they thought they could win them over, with stock prices falling and time running out. Conservative Republicans who have been decrying the bailout never wavered in their opposition, nor did liberal Democrats who saw the measure as a rescue plan for Wall Street millionaires. And House members in tough re-election bids abandoned the legislation in droves. "What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message." Pelosi's controversial speech |
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