House nays bailout, market plunges

WASHINGTON (LA Times-Washington Post) – The House yesterday rejected a $700-billion Wall Street… WASHINGTON (LA Times-Washington Post) – The House yesterday rejected a $700-billion Wall Street bailout that would have been the biggest government intervention in the financial system since the Great Depression, sending the stock market into a sharp downturn and leaving President Bush’s plan to bail out the economy in doubt. ‘ ‘ ‘ The vote was 205 in favor of the measure and 228 against. The Dow Jones industrial average closed down 777.68, the largest one-day point drop in its history. ‘ ‘ ‘ The result was a stunning setback for the president, who spent much of the morning ‘- along with Vice President Dick Cheney and Treasury Secretary Henry M. Paulson Jr. ‘- on the telephone trying to line up sufficient Republican support to win passage. ‘ ‘ ‘ Republicans voted against the Bush plan by a margin of about 2 to 1. Democrats gave it strong support. ‘ ‘ ‘ It was a politically excruciating vote for lawmakers, whose offices have been flooded with calls and e-mails overwhelmingly in opposition to the measure, and it divided lawmakers from the same party. ‘ ‘ ‘ ‘This is probably the toughest vote any of us has taken since we’ve been in Congress,’ said Rep. Gary Miller, R-Calif. ‘ ‘ ‘ ‘While this is not 1929 all over again, it could be,’ said Rep. Christopher Shays, R-Conn., who voted for the measure, even though he’s in a tough race. ‘ ‘ ‘ ‘We can’t let the foolishness and greed on Wall Street bring down Main Street,’ he added. ‘At least I don’t intend to.’ ‘ ‘ ‘ Democrats who control Congress balked at supporting the measure until they were assured a large number of Republicans would join them. ‘ ‘ ‘ But only approximately one-third of the House Republicans ended up supporting the bill. ‘ ‘ ‘ Right up until the roll call, Bush, Cheney, Paulson and industry groups called skeptical members of the president’s party. Deputy White House press secretary Tony Fratto said they worked one-by-one through a list of potentially recalcitrant Republicans, seeking to answer their complaints. ‘ ‘ ‘ Supporters of the ‘Emergency Economic Stabilization Act’ sought to portray it as important to ordinary Americans. ‘ ‘ ‘ ‘The economic security of our country is at risk,’ said Rep. Jim Costa, D-Calif. ‘ ‘ ‘ The measure would allow the Treasury secretary to buy bad debts from ailing financial institutions in an effort to shore up the economy. ‘ ‘ ‘ Rep. Paul Kanjorski, D-Pa., said that he would return to his district to explain that ‘We’re not bailing someone out in a far-off place called Wall Street. We’re making sure that next week and next month a worker in my hometown of Nanticoke, Pa., will be able to go to his ATM machine and draw out money.’ ‘ ‘ ‘ Rep. Mel Watt, D-N.C., said he had received a lot of calls from constituents questioning whether there is a crisis. But he said, ‘When the secretary of the Treasury and the chairman of the Federal Reserve tell me that there’s a real problem, the stakes become too high for me not to take it seriously. ‘ ‘ ‘ ‘I am convinced that the odds are bad enough that if we don’t do something today, we will regret it for a long, long time to come,’ he added. ‘ ‘ ‘ Supporters of the bill said they had included measures to protect taxpayers better, including an opportunity for the government to make money from the future sale of distressed assets. ‘ ‘ ‘ But the measure still drew opposition from a political coalition of liberal Democrats and conservative Republicans. ‘ ‘ ‘ Rep. Jeb Hensarling, R-Texas, warned that taxpayers could end up with the ‘mother of all debts.’ ‘ ‘ ‘ ‘Just because your constituents hate this bill and will hate it more when they learn the details does not mean that voting for it is an act of courageous patriotism,’ said Rep. Brad Sherman, D-Calif. ‘Just because this bill is unpopular doesn’t mean we have to pass it immediately.’ ‘ ‘ ‘ The debate followed an early-morning nationally televised pitch by the president, who said the plan, announced Sunday after intense negotiations among congressional leaders from both parties, ‘addresses the root cause of the financial crisis,’ and would restore the flow of credit. ‘ ‘ ‘ He emphasized that it would establish ‘a guarantee program that will insure assets at no cost to the taxpayer,’ and would make sure that ‘failed executives do not receive a windfall from your tax dollars.’ ‘ ‘ ‘ ‘The bill provides strong, bipartisan oversight so Americans can be certain that their tax dollars are used carefully and wisely,’ the president said. ‘ ‘ ‘ He spoke on a White House driveway outside the Oval Office, delivering barely three minutes of remarks intended to instill confidence that the administration and House and Senate leaders from both parties were singing from the same songbook and that as soon as the two chambers act, the economy will turn a corner. ‘ ‘ ‘ Although Bush’s remarks were timed for a wide audience watching morning television, his real audience in this case was much smaller: reluctant rank-and-file members of Congress and, most immediately, traders gearing up for the opening of the U.S. stock markets. ‘ ‘ ‘ He called the measure ‘an extraordinary agreement to deal with an extraordinary problem in our economy.’ ‘ ‘ ‘ ‘With this strong and decisive legislation, we will help restart the flow of credit, so American families can meet their daily needs and American businesses can make purchases, ship goods and meet their payrolls. We’ll make clear that the United States is serious about restoring confidence and stability in our financial system,’ Bush said.