AP: House ignores Bush, rejects $700B bailout bill

Posted by Kendall Harmon

In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it. The Dow Jones industrials plunged nearly 800 points, the most ever for a single day.

Democratic and Republican leaders alike pledged to try again, though the Democrats said GOP lawmakers needed to provide more votes. Bush huddled with his economic advisers about a next step. The House was to reconvene on Thursday instead of adjourning for the year as planned.

Read it all.

Filed under: * Economics, PoliticsEconomyThe September 2008 Proposed Henry Paulson 700 Billion Bailout PackagePolitics in General

39 Comments
Posted September 29, 2008 at 5:30 pm [Printer Friendly] [Print w/ comments]



1. Jeffersonian wrote:

Ha!  Gotta love the AP.  I wonder if this was a victory for House Minority Leader Nancy Pelosi and her tiny coterie of Democrats…

September 29, 5:38 pm | [comment link]
2. Katherine wrote:

This was a major black eye for Pelosi.  Ninety-four of her own Democrats voted against this thing, while 65 Republicans voted with her.  If she’d paid attention to her own caucus instead of political grandstanding and making nonsense allegations about the causes, she’d have this thing in the bag.  Some leader.

September 29, 5:45 pm | [comment link]
3. Irenaeus wrote:

“This was a major black eye for Pelosi”—-#2

Yep, shows what happens when Democratic leaders work with the Bush Administration and Congressional Republican leaders to advance an unpopular administration proposal.

The bill didn’t lose because of Speaker Pelosi. It lost because the administration has yet to convince the American people that a $700 billion bailout would leave them better off with than they otherwise would be.

September 29, 6:01 pm | [comment link]
4. Katherine wrote:

Hi, Irenaeus, and good to see you around here again.  Yes, the unease about this bailout is bipartisan.  I don’t know what the right thing to do is.  But surely Pelosi shouldn’t have been surprised by the vote from her own caucus.  Dems have a majority.  The loss of 94 of those votes against the recommendation of party leaders is stunning.

September 29, 6:11 pm | [comment link]
5. Little Cabbage wrote:

Irenaeus, you again hit it out of the park!  Bipartisanship with the Bushies and neocons is always a non-starter; they simply don’t keep their word and will do anything for political points.

Wow, the GOP certainly ignored their anointed leader-to-be, Sen. McCain!  His ‘personal leadership’ REALLY flopped!  Nice job, John!

September 29, 6:23 pm | [comment link]
6. Irenaeus wrote:

“The loss of 94 of those votes against the recommendation of party leaders is stunning”

But less stunning than having a majority of House Republicans vote against their leadership and their president.

Think about it: House Democrats supported Pelosi, 140-95. House Republicans opposed Bush and Boehner, 65-133.

And your response is to say, “This was a major black eye for Pelosi” [#2].

September 29, 6:25 pm | [comment link]
7. Little Cabbage wrote:

Add to Post 5:  Nice to see how much confidence the GOP on the Hill have in their own presidential candidate!  What a farce his ‘suspending the campaign’ and rushing to DC was!  He’s not the leader of the rabid neocons of the House GOP—they hate him, as amply demonstrated by their talk-show minions, who pilloried McCain right up until he won the nomination.

September 29, 6:25 pm | [comment link]
8. justice1 wrote:

Here’s my near ignorant 2¢. 

It seems to me that the problem here is that one of the most unpopular presidents in history, who with his cronies has already spent billions upon billions of taxpayers’ dollars in Iraq, benefiting many of those same cronies, is now asking for more money from people who have lost homes, jobs and then some, to “bail out” the very corporations that were complicit in their loss.  And for what?  To ease the economic threat warning issued by the same administration?  I suspect there are a lot smarter people than me who are suspicious that the US government might actually waste the $700 billion and rescue nothing, especially their already lost homes, while some super rich corporate fat cats across the globe buy new ones with these same tax dollars.

I am guessing some of the congressmen heard something like this, and thought, “I like my job.  I am voting against.”

September 29, 6:28 pm | [comment link]
9. jamesw wrote:

Government bailouts and intervention in the economy is anathema to the GOP’s free market economic theory, but much more palatable to the Dem’s, I would think.  Furthermore, most people seem to think that Obama is the most likely to win in November.  So my natural assumption would be that the Dems would be much more inclined to vote for this package then would the Republicans.

September 29, 6:33 pm | [comment link]
10. Jeffersonian wrote:

Maybe, in the end, this was just a rotten bill and deserved to go down in defeat.  That’s my take, though it was better than the mess served up last Friday.

September 29, 6:34 pm | [comment link]
11. Jeffersonian wrote:

So my natural assumption would be that the Dems would be much more inclined to vote for this package then would the Republicans.

Ah, but have you noticed Obama’s poll numbers since this crisis hit?  Now, if you were a Democrat wanting to see your guy in the White House, would you want an end to the panic?

September 29, 6:35 pm | [comment link]
12. John316 wrote:

Do we know if McCain will again be suspending his campaign and going to Washington to solve the problem?

September 29, 7:15 pm | [comment link]
13. Pam C. wrote:

I know this is probably a stupid question that will show my utter lack of knowledge of economics but, where will the government get 700 BILLION dollars? Do they just have that kind of cash stuffed in a mattress somewhere? That’s a lot of change and I don’t understand where it will come from. Thanks for being tolerant of someone struggling to make some sense out of all of this.

September 29, 7:21 pm | [comment link]
14. Betty See wrote:

Evidently many people in Washington are buying into this “PANIC” thing and want law makers to pass this buyout without taking the time to read this bill or study alternative ways of solving the problem.
We taxpayers are wary because these pressure tactics resemble the tactics that many unscrupulous salesmen use to push us into signing a contract without thinking it through and now it looks like some of these salesmen expecting a taxpayer buyout are from foreign (global) markets. I am glad congress is resisting the urge to be panicked into action without thinking about it.
Nancy Pelosi and other fear peddlers should remember the words that President Franklin Delano Roosevelt said after a similar crisis: “We have nothing to fear but fear itself”, it is time for a Democrats and Republicans alike to lift their finger from the PANIC button and calmly study the least expensive and most efficient way this problem can be solved.
If in the mean time, some of these institutions find a way to save themselves and their clients so much the better.

September 29, 8:14 pm | [comment link]
15. Jim of Lapeer wrote:

It’s a great question Pam. They get it where they always get it, they print up more phony money and leave the problem for a future generation to clean up.
  It’s irresponsibility of a Titanic proportion and fortunately there are a few good Congress members on both sides of the aisles who for whatever reason are standing in the way. Thank them.

September 29, 8:18 pm | [comment link]
16. Little Cabbage wrote:

Betty See, that’s great….I guess you’re not a small businessperson awaiting word on your latest business loan, right???  The credit markets are frozen.  We need to stand in the gap for now, and THEN take time to consider and reconsider all this mess the GOP’s anti-deregulation (read:  anti-protection for the little guy) mania has brought us.

September 29, 8:25 pm | [comment link]
17. Brian of Maryland wrote:

Little,

Please.  The Dems fingerprints are all over this mess.  It was the quota mentality of “money for nothing and your house for free” that pushed lenders into making all the loans that got us into this mess. The evidence is there for anyone to see: it was the Dems who mightily resisted the kind of regulatory change in 2004/2005 that might have stopped this before it got started.

The anger outside the beltway, that led to 95 of her own party members voting against it, comes from those who bought what they could afford, put down 20% and knew they had the income to actually live within their budget.  That many people made huge amounts of money off this debacle is obvious.  That my children and their children should have to pay it off is a different issue.  Therefore, the average taxpayer, who probably does understand the issues, wants some kind of intervention, but not what was proposed.

And yes, having once worked on Capitol Hill, trust me, everyone who voted against this thing did so because their constituents demanded it.  Now that the speaker has clearly made this an election year issue, slamming the Republicans in her speech the way she did, almost insures this will get a lot worse before a solution is found.

Who knows, McCain may yet come out of this looking pretty good.  He’s probably more in line with the average American than that “other guy.”

Brian

September 29, 8:43 pm | [comment link]
18. Christopher Johnson wrote:

This thing has been coming on for a long time:

link to NY times

But Matthew 6:27 and all that


an elfin reminder:  please avoid pasting long URLs.  Use tinyurl.com or turn your URL into a link.

September 29, 8:48 pm | [comment link]
19. Pam C. wrote:

Another stupid question. Aren’t Freddie and Fannie government subsidized entities in some way? If so, isn’t the government in essence bailing out itself?

September 29, 9:11 pm | [comment link]
20. Betty See wrote:

Pam, #19,  I am not an expert, only a taxpayer, and I may not understand this correctly so I hope someone will correct me if I am wrong but this is how I understand it: 
It is a given that the government has to back Freddie and Fannie mortgages because they are government insured. But it sounds to me like the bail out is intended for all the other mortgage companies (and financial companies?) that have bad mortgages (or debts?) too.
I hope someone can tell us which institutions or what kind of debts the bail out is intended to cover.

September 29, 9:46 pm | [comment link]
21. Albany+ wrote:

What exactly was the pork stuffed into the bill that got more than a few noses out of joint?

September 29, 10:04 pm | [comment link]
22. Karen B. wrote:

It’s VERY late (or VERY early, depending on your perspective) on this side of the Atlantic as I write this.  And so perhaps I am punchy.  (Before I got online I’d spent 13 hours immersed in 34 pages of 4 different Excel spreadsheets.  Our NGO’s fiscal year ends tomorrow and I had 6 months of expenses to verify to close out our books, PLUS 2009 - 2011 budgets to finalize for a major funding proposal due next week.  Joy joy joy).

So please take this comment with a large grain of salt.  It may just be tiredness bringing out extreme cynicism.  But, it occurs to me that torpedoing the bailout plan may be a political strategy by the Dems to try assure Obama’s victory.  Creating financial panic is a pretty good way to force a mass exodus away from the GOP.

Not that there aren’t MASSIVE reasons to be concerned about the GOP’s track record and stewardship without political shenanigans.  But I’d have to say if I were a betting woman, I’d say today’s events have just put the seal on Obama’s election.  I’m not happy.  (But I’m not happy with McCain either.  I’m sick of voting for “least worst” candidate.  It would be nice to once again some year have a candidate I’m eager to vote FOR.)

Anyway, sorry for the digression and cynicism.  I hope and pray presidential political shenanigans have not swayed the Congressional vote, but I have no confidence in Congressional leaders that would convince me this is just wild imagining on my part.  So tragic.

September 29, 10:54 pm | [comment link]
23. Karen B. wrote:

Probably y’all should ignore my #22 entirely.  I just realized that many more Republicans voted against the plan than Democrats.  Somehow I had the numbers reversed.  So hopefully we all can say “never mind” to my comment above.

And I’m going to try to get some sleep.  God’s mercies are still new every morning, and I’m confident that will be true of this new day ahead too.

September 29, 11:01 pm | [comment link]
24. Sarah1 wrote:

RE: “But less stunning than having a majority of House Republicans vote against their leadership and their president.”

I actually agree.  I am stunned that the House Republicans had the integrity to vote their own stated principles and thus go against their own President.

My suspicion is that the Democrats who voted against have probably gotten the same level of calls from their constituents as the Republicans.

September 29, 11:15 pm | [comment link]
25. Now Orthodox wrote:

1) Raise FDIC insurance to $200,000.  The FED can do this. This would have stopped the “run on the bank” at WAMU that caused its collapse.

2) Eliminate the “mark to market” quarterly valuation of assets required by Sarbanes-Oxley that adjusts capital requirements upward in deflationary markets.  Cox of the SEC can do this with a stroke of the pen.  Imagine a loan to value ratio of 80/20 on your $300k house and now the appraiser says your house is only worth $275k .  Could you come up with the $20k to maintain the 80/20 ratio on your current mortgage?  This is what financial institutions have to do under the current law.

3) Loan the money to banks from Treasury at current short rate plus 2% and require a loan repayment on a 3-5 year plan.  This will allow liquidity back into the market.  The TED spread is so great now that banks refuse to lend any of their cash on hand to other banks for fear of the “mark to market” consequences should the loans on their books be “devalued” causing an upward requirement of capital reserves for the amount “devalued”.

4) Require oversight.
............................................................................................

This was the basic GOP proposal after McCain’s visit Thursday/Friday.  I understand that until McCain showed up the house Republicans had not even been consulted and only a few senate Republicans had seen the bill.  Another issue for the house Republicans was the $20 billion that the dems had “earmarked” for ACORN in the final version of the bill.  I think, though not certain, that ACORN contributed heavily to Obama’s campaign.  ACORN is ....well look it up for yourself….most of you will be surprised.

September 30, 12:30 am | [comment link]
26. Now Orthodox wrote:

#19
McCain proposed reform and oversight of Fannie & Freddie in 2005.  It did not get democrat support in Congress and was killed.  Franklin Raines, Obama’s chief economic advisor, worked at Fannie and made $90 million in the 6 years he was there.  Both of the quasi-govermental lenders packaged loans and sold them to investors.  Many of these questionable loans were made because of legislation passed in 1995 that stipulated that minority lending quotas had to be met in order to be licensed to lend.  It’s these sub-prime, ARMs, and interest only package loans to folks who could not afford the houses that started the cascade.

September 30, 12:42 am | [comment link]
27. Betty See wrote:

This may sound far-fetched and maybe the hysteria displayed on television about the “needed” bail out and its effect on foreign markets is getting to me, but I have to wonder if, now that we are a global economy, U.S. taxpayers might end up buying bad mortgages or debts owed by investors in Iran, Russia, or worst of all by al-Quida operatives.
It is getting late and maybe my imagination is running wild so I guess it is time to stop posting, but I would sleep better if I could read a comment that gives a more realistic assessment of the bail out plan.

September 30, 1:31 am | [comment link]
28. Katherine wrote:

Irenaeus, sorry not to respond.  I went to bed.  As someone pointed out above, the bailout bill was drafted by the House and Senate leadership and Republicans didn’t even see it until outrage began to rise.  Further, it seems to me that this is a Democratic sort of bill, using government debt to cover private debt, so I still do think the loss of so many Democratic votes was stunning and may not have been expected by the leadership.

September 30, 1:56 am | [comment link]
29. Dave B wrote:

To those who are critical of Bush and McCain where is Obama? All I have seen from him are criticism and speechs.  Obama did not lift up a finger against Chicago political corruption, what makes you think he can even began to handle DC and Wall Street?  He can’t even criticize Dodd or support Polisi (I guess he wasn’t needed since they didn’t call).  I think Obama may win this election and it will Jimmy Carter 2, maliaze index and cardigans all over….

September 30, 7:35 am | [comment link]
30. justice1 wrote:

Where is Obama?  Good question.  I think the simple answer is Obama is still in diapers when it comes to leading a country.  I suspect he is watching Veggie Tales.

September 30, 8:52 am | [comment link]
31. Dave B wrote:

Matt (31)-“Why didn’t more Democrats and Republicans vote for the bill? The reason is pretty simple. Democrats hate that risky behavior on Wall St has a limitless upside but no downside.”  No, I think the Dems with seats that are threatened would have lost thier seats in the House and Nancy would not have been speaker!  There is a report that Pelosi told Reps with threatened seats not to vote for it.  The Dems wrote the bill and presented the bill.  They couldn’t even stand the heat of voting for it.  If it was a bad bill why did they bring it up for a vote with out correcting it?  Where is the Democratic leadership?  We are selecting a President and choosing who will runn the house and senate.  Are there any adults in the room?

September 30, 9:33 am | [comment link]
32. Sarah1 wrote:

RE: “so I still do think the loss of so many Democratic votes was stunning and may not have been expected by the leadership. . . . “

I also was quite surprised.

But my understanding is that some of those Democrats who did not vote for it were actually upset that there weren’t a number of further liberal perks in it for mortgage refinancing, etc, etc.  I read a list of about five such things that were desired and not gotten.

But I also think my initial gut reaction was true for a good portion of those Democrats as well—Main Street didn’t want the package to pass, and Democrats, just like Republicans, would like to be re-elected.

September 30, 9:58 am | [comment link]
33. Clueless wrote:

#33 “Main Street didn’t want the package to pass, and Democrats, just like Republicans, would like to be re-elected.”

And, Maybe.  Just Maybe, it is possible that Main Street, who will be picking up the tab for this two decade Wall Street frat party might NOT wish to bail out the greedy and arrogant pot heads who began this mess even more than they already must.

Maybe, Main Street might have a point that even if stocks plunge immediately without a bailout, it is still worse to debase the dollar and then watch stocks plunge more slowly with the bailout.

Maybe Main Street might be correct in being reluctant to pass yet another bill on to her children and grandchildren.

Finally, maybe, just maybe, Main Street (despite its “clutching to God and Guns”, intelligent design, Bible thumping stupidity and parochialism) could be smarter than the Harvard educated Masters of the Universe who came up with cleverer and cleverer ways to disguise bad debt as tasty triple A securities suitable for the pension funds of elderly women. 

Maybe when these same geniuses, said “Sign here and take responsibility for this toxic waste that we can’t value, Trust me, you’ll make a profit, Main Street was correct to have doubts.

Maybe our Congressmen decided to side with the folks whom they promised to serve, because they actually agreed with them.

Anything’s possible.

September 30, 10:11 am | [comment link]
34. Billy wrote:

Dems want this crisis to subside and get a bill passed ...  they need for this to happen; but it case it doesn’t work, they want the Repub along, too.  That’s why Pelosi said she would not allow the bill to come for a vote, unless 85-100 Repubs voted for it.  The more the “crisis” lingers, the more possibility there is for more to come out that shows the Dems fingerprints all over how this started with the Clinton Administration (read the 1999 article from liberal NYT - who even then didn’t think making loans to unqualified people was a good idea) and how people like Obama with ACORN pushed it on banks with civil rights tactics (sit ins in banks; protests against ATM machines in neighborhoods without certain amounts of loans being made, etc.).  How Barney Frank and Chris Dodd initially got the portfolio limits of Fan and Fred to allow them to buy more of these worthless loan bundles and then they blocked attempts since late 2005 (see prior article about McCain and 4 other senators trying to reign in Fannie and Freddie) to bring some regulation and reason to this process.  Yes, when the banks discovered that they could sell these worthless loans to Fannie and Freddie, insured by AIG- the largest insurer in the world - they went crazy with greed and made the loans willy nilly, because the interest rates were kept so low by Greenspan and his guys in the name of inflation; because the interest rates were kept so low, banks had to expand their volume of loans to maintain their profits.  So it is all interelated and blame is on all sides ... BUT it all started with liberal politicians messing in the free market system for social engineering reasons, which always screws up whatever group is trying to be socially engineered, and like government job programs, never works and only wastes tons of taxpayer money.

September 30, 11:27 am | [comment link]
35. Billy wrote:

Matt, #37, I would like to believe that about both parties, and I’m sure there are a few.  But you don’t deliver the partisan speech that Pelosi gave just before the vote yesterday, if you are thinking only of the good of the American economy.  She was told by Boehner that she had the votes to get the bill passed, so she decided (probably already had the plan in place) to take the well, lambast the Bush Administration and the Repubs, and then make it look like the Repubs were there with their tails between their legs to follow the Dems brave lead to fix the problem she says they caused.  Instead they decided they had had enough of her brand of partisan politics ... and it wasn’t, like Barney Frank said, that they got their feelings hurt.  They weren’t going to let Pelosi turn this into a political nightmare for them.  Instead, they turn it back on her, and she looked foolish.  (And BTW, Barney wants this “crisis’ to end more than anyone, because he is up to his neck in the origination of the problem, in requiring Fan and Fred to buy these bad loan bundles, and in blocking any regulation of them.)

September 30, 11:43 am | [comment link]
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