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House Defeats $700 Billion Bailout Proposal

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By The Associated Press and Highlands Today Staff

The Tampa Tribune

Published: September 30, 2008

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.

In Highlands County, there was mixed reaction but everyone interviewed was concerned what would happen next.

"I've seen some stupid congressmen in my life; these guys take the cake," said Edward Davidson of Sebring. "This is the Great Depression all over again."

The economy has stopped, he warned.

Passing the bailout would have provided a floor to support banks and lenders from falling into a deeper financial crisis, Davidson added.

"You're not saving Wall Street, you're saving Main Street," he said. If banks lose money on these loans, which they've already taken a write down on ... there's no floor. They can't land; they can't lend."

How many cars are they going to sell if you can't get a car loan, he asked. Everything stops.

Vicky Wolf's husband phoned her with the news of the failed vote.

"He told me there was one Republican who didn't vote," she said. "Everybody is buying everybody out and everybody is going under - I'm worried about that."

If the bailout passes, it's your children who are going to have to pay for it later on, Wolf said.

While he was dining in a restaurant, Curtis McMenamy of Sebring watched the stock returns on TV when the vote failed.

The Dow Jones dropped from 100 down to 500 down within minutes, he said. The Dow ended up dropping 780 points by the end of the day.

"It scares me," he added. "What scares me the most is people losing all confidence and start taking their money out of the bank. We will see what they come up with over the night."

Meanwhile, Congressman Tim Mahoney, FL-16, voted for the "bipartisan plan in Congress to stabilize the American financial markets and protect taxpayers," according to a press release.

"Eleven days ago, President Bush asked Congress for a $700 billion handout. After considerable bipartisan cooperation, Congress completely overhauled the President's initial proposal and created a better bill that eliminated excessive executive compensation and ensured that any taxpayer losses are repaid by the industry," the press release added.

Mahoney continued that Congress failed to pass "an important piece of legislation to protect Main Street from the troubles on Wall Street.

"Our work is not done. The Senate will now take up the bill and the House will continue to hammer out a compromise that renews confidence in our financial markets and protects Americans' investment in their homes, savings and businesses."

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

As a digital screen in the House chamber recorded a cascade of "no" votes against the bailout, Democratic Rep. Joe Crowley of New York shouted news of the falling Dow Jones industrials. "Six hundred points!" he yelled, jabbing his thumb downward. The decline was about 530 points shortly before the close of the trading day.

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. Not enough members were willing to take the political risk just five weeks before an election.

"No" votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.

The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. "We are ready to continue to work on this," said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

"The legislation may have failed; the crisis is still with us," said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.

"What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message."

At the White House, Bush said, "I'm disappointed in the vote by the United Sates Congress on the economic recovery plan."

The president was to meet with members of his economic team later in the day "to determine next steps," said spokesman Tony Fratto.

Republicans blamed Pelosi's scathing speech near the close of the debate - which attacked Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets - for the vote's failure.

"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Minority Leader John Boehner said. Pelosi's words, the Ohio Republican said, "poisoned our conference, caused a number of members that we thought we could get, to go south."

Rep. Roy Blunt, R-Mo., the whip, estimated that Pelosi's speech changed the minds of a dozen Republicans who might otherwise have supported the plan.

Frank said that was a remarkable accusation by Republicans against Republicans: "Because somebody hurt their feelings, they decided to punish the country."

Monday's action had been preceded by unusually aggressive White House lobbying, and Fratto said that Bush had been making calls to lawmakers until shortly before the vote.

Bush and his economic advisers, as well as congressional leaders in both parties had argued the plan was vital to insulating ordinary Americans from the effects of Wall Street's bad bets. The version that was up for vote Monday was the product of marathon closed-door negotiations on Capitol Hill over the weekend.

"We're all worried about losing our jobs," Rep. Paul Ryan, R-Wis., declared in an impassioned speech in support of the bill before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it - not me.' "

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 world markets on Congress, Ryan added.

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

The legislation the administration promoted would have allowed the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy that is already sputtering.

More than a repudiation of Democrats, Frank said, Republicans' refusal to vote for the bailout was a rejection of their own president.

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