Tilted Forum Project Discussion Community - View Single Post - Bailout Fails. DOW Plunges 778 points. What do you think?

Cynthetiq · 09-29-2008, 10:27 AM

Quote:

View: House votes down massive bailout measure
Source: MSNBC
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House votes down massive bailout measure
House votes down massive bailout measure
Debate prior to balloting showed deep reservations about $700 billion plan
BREAKING NEWS
The Associated Press
updated 2:18 p.m. ET, Mon., Sept. 29, 2008
WASHINGTON - The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.

Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.

When the critical vote was tallied, too few members of the House were willing to support the unpopular measure with elections just five weeks away. Ample no votes came from both the Democratic and Republican sides of the aisle.

Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home.

Even as the electronic roll call began, Democratic and Republican leaders were uncertain about having enough votes to pass the politically unpopular plan. It's the most sweeping government intervention in markets since the Great Depression.

The bailout would have put in place an unprecedented federal program to buy up rotten assets from cash-starved firms. The goal is to free up choked credit that was threatening to cause broader market turmoil.

"Many of us feel that the national interest requires us to do something which is, in many ways, unpopular," said Rep. Barney Frank, the Financial Services Committee chairman, before the vote. "It is hard to get political credit for avoiding something that has not yet happened."

The bill was the product of marathon bargaining over the weekend among various House and Senate representatives.

President Bush urged the bill's passage, saying in a White House appearance Monday morning that "every member of Congress and every American should keep in mind that a vote for this bill is a vote to prevent economic damage to you and your community."

"With this strong and decisive legislation," he said, "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."

As debate opened, Frank, D-Mass., called the measure "a tough vote," but a necessary one to stave off a financial meltdown. It lets the government buy sour assets — mostly mortgage-backed securities — from struggling financial institutions in a bid to clear out clogged avenues of credit for businesses and individuals alike.

At the White House, spokesman Tony Fratto confirmed vigorous efforts to get the bill through.

"We're going to keep working with them right up until the vote," he said.

Fratto also said that Bush, Vice President Dick Cheney, Treasury Secretary Paulson, White House chief of staff Josh Bolten and other top officials were contacting House members in an effort to rally support, and that the president himself had call list of "a couple dozen members."

Fratto said Bush was telling aides some of those he'd talked to were committed to voting for the bill while "others remained skeptical."

With their dire warnings of impending economic doom and their sweeping request for unprecedented sums of money and authority to bail out cash-starved financial firms, Bush and his economic chiefs have focused the attention of the world and the markets on Congress, said Republican Rep. Paul Ryan of Wisconsin. Without the bill, Ryan added, "the worst is yet to come."

"We're in this moment, and if we fail to do the right thing, Heaven help us." he said.

As Democratic and Republican leaders hunted for votes, leaning on lawmakers to take a political hit for the good of the country, Ryan said, "We're all worried about losing our jobs. ... Most of us say, 'I want this thing to pass, but I want you to vote for it — not me.' "

Two leading players also spoke early Monday, lobbying on morning television news shows for approval of a package deeply unpopular with a public angry that taxpayer money will save Wall Street firms from heavy risk-taking. Thousands of angry phone calls, e-mails and letters have poured into Capitol Hill from constituents. Supporters essentially acknowledged that it was a hold-your-nose-and-vote matter.

Critics on the left and right said Congress was being stampeded into hasty action on a plan that wouldn't make a dent in the nation's economic woes, which have at their root a subprime mortgage meltdown and the bursting of the housing bubble, followed by a wave of foreclosures.

The legislation does not require any federal action to prevent foreclosures, although it mandates that the government try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

"Like the Iraq war and the Patriot Act, this bill is fueled on fear and hinges on haste," said Democratic Rep. Lloyd Doggett, R-Texas.

Republican Jeb Hensarling of Texas, a leading conservative, said the bill puts the country "on the slippery slope to socialism. If you lose your ability to fail, soon you will lose your ability to succeed."

The Senate planned a vote as early as Wednesday.

Sen. Chris Dodd, D-Conn., said that failure to act would spread the contagion of frozen credit markets even further. "This is not just about Wall Street," said the Banking Committee chairman.

Sen. Judd Gregg, R-N.H., told The Associated Press: "It's one of those situations where if it passes and works, people will never know how close we were to the brink."

Still, both men said the necessity of such massive government action is a sad day for the nation. They were speaking not just to rank-and-file lawmakers who are under a spotlight in the contentious, dramatic congressional debate, but to U.S. and global markets which have displayed nervousness about Washington's determination to act.

Investors worldwide and in early trading in the United States continued to show doubt about whether the bill would go through, much less go a long way toward curing the systemic problems that have unnerved financial markets across the globe for weeks.

There was a further sign of general economic deterioration Monday as the Commerce Department reported that consumer spending was unchanged in August — even worse than the small 0.2 percent gain that economists had anticipated. It was the weakest showing since spending was also flat in February.

Federal Reserve Chairman Ben Bernanke said the bill "should help to restore the flow of credit to households and businesses that is essential for economic growth and job creation."

Bush said he "fully understands" the bailout bill was a difficult vote. He and Vice President Dick Cheney took to the phones to corral individual members of Congress.

Lawmakers wrote a number of restrictions into the pending legislation, including oversight over the operation of the program, curbs on "golden parachutes" for top executives of firms getting help, and assurances that taxpayers would ultimately be reimbursed by the companies for any losses. But the government would have broad discretion to decide how to implement the rescue.

The legislation also requires that the government take ownership stakes in companies that receive federal infusions, so it could share a piece of potential future profits.

Bush said the ultimate cost of the bailout will be much less than the $700 billion authorized.

Treasury Secretary Henry Paulson sought the unprecedented amount of money with little supervision.

Instead, the bill lets Congress block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification — and subject to a congressional resolution of disapproval. Still, the resolution could be vetoed by the president, meaning it would take extra-large congressional majorities to stop it.

At the White House, spokesman Tony Fratto described vigorous efforts to get the bill through.

"We're going to keep working with them right up until the vote," he said.

Fratto also said that Bush, Vice President Dick Cheney, Treasury Secretary Paulson, White House chief of staff Josh Bolton and other top officials were contacting House members in an effort to rally support, and that the president himself had call list of "a couple dozen members."

Fratto said Bush was telling aides some of those he'd talked to were committed to voting for the bill while "others remained skeptical."

What are your thoughts on the bailout? Should it have passed? What would you like to see done by the politicians?

Personally, I think that the finance institutions should have been allowed to fail. While it would be painful for everyone, it is what happens when the music stops and there isn't enough seats for everyone. The Visa card commercial comes to mind at how easy it is to just spend money, money that you don't have, money that you've not yet earned, money that your children, and your children's children have not yet earned.

Smaller institutions with better books would have picked up the pieces and started the process over.

As far as oversight is concerned, I'm not convinced that their form of regulation would be beneficial. After ENRON/Tyco/Worldcom/Adelphia fiascos, some sort of oversight is needed, but Sarbanes-Oxley is a joke and doesn't do anything but make it harder for these companies to do business.

Finally, why let only some of the few reap the benefits of profits when taxpayers will be taking on the risk and getting very little for their share of risk.