Thursday, October 02, 2008

House votes to reject bailout



House votes to reject bailout
Carolyn Lochhead, Chronicle Washington Bureau
Tuesday, September 30, 2008


(09-30) 04:00 PDT Washington - -- House Speaker Nancy Pelosi looked ashen as she faced reporters Monday afternoon, the stock markets plunging on news that the House had defeated, 228-205, a $700 billion bailout of the U.S. financial system.
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Future of the bailout bill:
Passes when tempers cool
Passes after substantial amendments
Fails entirely
See ya when the Dow is 2,000 points lower


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"What happened today cannot stand," Pelosi said. "We must move forward, and I hope that the markets will take that message."
The markets did not. They plummeted as two-thirds of Republicans and more than a third of Democrats voted no.
Senate leaders quickly stepped forward to project an aura of calm. The two leading Senate negotiators, Banking Committee Chairman Chris Dodd, D-Conn., and Judd Gregg, R-N.H., promised that while no votes would happen over the Jewish holiday today, even as markets remain open, Congress will not leave without taking action.
"We're going to stay here until we get it fixed," Senate GOP leader Mitch McConnell promised. "It is inappropriate to fix blame. What we want to do is fix the problem."
But no one could outline a path forward. "I can't give you an answer at this point," McConnell said. "It's simply unknown."
Pelosi could call the House back into session at any time to reconsider its vote. The Senate could vote on it as originally planned on Wednesday.
But no plan was put forth after things collapsed Monday. Dodd called the vote "a failure of will" and said tempers need to cool as leaders decide how to proceed.
A close vote had been expected in the House, but not a loss. Angry constituents, protests from conservative and liberal activists - and more than anything, a deep distrust within both parties of President Bush - combined with a lethal force that leaders on either side could not control.
Anger and disarray ruled the day. Democrats blamed Republicans for failing to deliver half their votes, and Republicans blamed Pelosi's scathing speech on the House floor, in which she ripped the Bush administration and a free-market philosophy run riot and hoped for better days under a new president.
The scene was the world of Washington turned upside down. As members gathered to vote, Democrats gave ovations to two Republicans, House Minority Leader John Boehner, R-Ohio, and the Financial Services Committee's ranking Republican, Spencer Bachus, R-Ala., for their courage in supporting the bailout.
As the voting ran into overtime, liberal Democrats such as Dennis Kucinich of Ohio were joined by conservative Republicans shouting, "Regular order!" demanding that the vote be gaveled to a close.
Majority Leader Steny Hoyer, D-Md. - who moments before had declared in a stirring speech that in a time of national crisis there are no political parties, only Americans - angrily confronted Republican dissenters. Pelosi and her lieutenants huddled to no avail, looking up nervously at the roll call as votes failed to materialize.
"Everybody was just sitting there in awe," said Rep. Sam Farr, D-Monterey, who voted for the bill. Republicans "just walked away from their leaders and threw McCain under the bus."
Republican presidential nominee John McCain had returned to Washington late last week, saying he would quell the House Republican revolt, and just a day before had been praised by House Republicans for his efforts.
McCain and Democratic nominee Barack Obama traded charges of injecting partisanship into the debate and urged action. Campaign politics aside, both have largely deferred to Congress on the financial crisis that one of them will be left to manage.
Telephone calls from President Bush went unheeded. Bush is now poisonous on Capitol Hill. Both parties share profound outrage at the crisis on his watch. There is little faith that an administration that oversaw the events leading to the crisis can fix it now.
Like the boy who cried wolf, said Farr, "Bush just has no credibility. When he ran around saying the sky was falling, nobody believed it. Now we're in a domestic crisis when the government needs credibility."
Pelosi, a fierce opponent of the Iraq war, is convinced that the risk of assuming Bush has it wrong this time is too great.
She went on the floor to recall in the starkest terms the warning Federal Reserve Chairman Ben Bernanke, whom she called "one of the foremost authorities on the Great Depression," had delivered to her when he pleaded for the bailout, describing credit meltdown as a once-in-a-century event to drive home its peril.
Pelosi described her shock at the warning and her outrage at the price tag. Cornered by events and with just days to act and forced to rely on an administration she loathes, Pelosi had to accept the broad outlines of Treasury Secretary Henry Paulson's proposed fix. Leaders in both parties changed the bill as much as they could. But in the end, Pelosi could not pass the bill with her own party's votes.
Paulson said after the vote that he would 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." He added, "This is much too important to simply let fail."
The Congressional Black Caucus, whose new leader is Oakland's Barbara Lee, joined conservative free-market Republicans in the revolt. Lee said she voted against the bill because it did nothing to create jobs.
GOP leaders blamed Pelosi for pushing 12 wavering Republicans over the edge. "We put everything we had into getting the votes to get there today," Boehner said. "But the speaker had to give a partisan voice that poisoned our conference, caused a number of members, who we thought we could get, to go south."
Democrats ridiculed the claim. "I am appalled," said House Financial Services Committee chairman Barney Frank, D-Mass. "There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis. And because somebody hurt their feelings, they decide to punish the country."
Darrell Issa, R-Vista (San Diego County), who made a fortune in car alarms, calmly told reporters afterward, "This is a manufactured crisis." He said the administration already has the tools it needs to inject capital into banks, action he said would be "every bit as effective" as the bailout.
Issa and other dissident Republicans had consulted with William Isaac, former chairman of the Federal Deposit Insurance Corp., who urged them to explore alternatives.
"People began to realize that they don't have to give $700 billion to the administration," Issa said. "The FDIC can provide the capital ... . They can end this crisis with the tools they have."
He and others demanded the suspension of a recent "mark to market" accounting rule that requires companies to write down their assets to current market value. They also said FDIC insurance should be raised to cover deposits larger than $100,000 to prevent a run on banks - already under way - by small businesses and wealthy individuals.
Asked whether those items could be included, Gregg said it would be "counterproductive" at this stage to discuss reopening the bill. Gregg and Dodd each said negotiators from both parties had acted fairly, had compromised and had come away with their basic concerns met.
In fact, behind the partisan breakdown, there is a remarkable consensus on the need for legislation.
Members have described themselves as hostages. Rep. Brad Sherman, D-Sherman Oaks (Los Angeles County), who voted against the bailout, said the original Treasury plan was "a ransom note that said if you ever want to see your 401(k)s again, send us $700 billion in unmarked bills."
Rep. Paul Ryan, a conservative Wisconsin Republican who had been a ringleader of the House rebellion, said he voted for the legislation so he could go home to his family and sleep at night in good conscience, despite his reservations and his belief that Paulson had made the crisis worse.
"I hate this moment we're in," he said. "We are in a massive credit crunch. I'm receiving thousands of constituent calls saying, 'Don't do this.' " With only a month before elections, he said many members feared they would be voted out of office if they voted yes on the bailout.
"This to me is a conscience vote," Ryan said. "The easiest thing would be to vote no and go hide in my office and watch the markets collapse. I will suffer politically for this, but I will sleep at night."
Bay Area delegation's roll call
By a vote of 228-205, the House defeated the $700 billion bailout package. How the Bay Area delegation voted (a "yes" vote is a vote in favor of the bailout):
Voting Yes
Anna Eshoo D-Palo Alto (14th District)
Mike Honda D-San Jose (15th District)
Zoe Lofgren D-San Jose (16th District)
Jerry McNerney D-Pleasanton (11th District)
George Miller D-Martinez (7th District)
Nancy Pelosi D-San Francisco (8th District)
Jackie Speier D-Hillsborough (12th District)
Ellen Tauscher D-Walnut Creek (10th District)
Voting No
Barbara Lee D-Oakland (9th District)
Pete Stark D-Fremont (13th District)
Mike Thompson D-St. Helena (1st District)
Lynn Woolsey D-Petaluma (6th District)
One wild month
Sept. 7: The federal government seizes control of mortgage giants Fannie Mae and Freddie Mac, saying they are "too big to fail."
Sept. 14: Lehman Bros. says it is unable to find new investors after being turned down by the federal government; Merrill Lynch arranges a hasty deal to be bought by Bank of America for $50 billion.
Sept. 15: Lehman Bros. declares bankruptcy, the largest in U.S. history.
Sept. 16: The federal government announces $85 billion emergency loan to rescue American International Group, the world's largest insurance company.
Sept. 21: Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke announce a $700 billion federal bailout plan.
Thursday: Federal regulators seize Washington Mutual Bank and sell it to JPMorgan Chase in the largest bank failure in U.S. history.


Monday: Citigroup agrees to buy Wachovia for $2.2 billion.
Source: Chronicle news services
E-mail Carolyn Lochhead at clochhead@sfchronicle.com.


This article appeared on page A - 1 of the San Francisco Chronicle




Note: Red Bolds and Highlights added for emphasis. Arsenio.
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