Dow Jones falls as US bill defeated

Republicans: Bailout failed because Pelosi blamed Bush for crisis; Obama to Congress: Get this done.

By JERUSALEM POST STAFF
wall street 224 88 (photo credit: )
wall street 224 88
(photo credit: )
In a vote that shook the US government, Wall Street and markets around the world, the House of Representatives defeated a $700 billion emergency rescue for the nation's financial system on Monday and left both parties and the Bush administration struggling to pick up the pieces. The Dow Jones industrials index plunged 777 points, the most ever for a single day. "We need to put something back together that works," a grim-faced Treasury Secretary Henry Paulson said after he and Federal Reserve Chairman Ben Bernanke joined in an emergency strategy session at the White House. At the Congress, Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a reworked version. Senate leaders showed no inclination to try to bring the measure to a vote before they could determine its fate in the House. President George W. Bush, meanwhile, was scheduled to make a statement on the rescue plan Tuesday morning, the White House said. All sides agreed the effort to bolster beleaguered financial markets, potentially the biggest government intervention since the Great Depression of the 1930s, could not be abandoned. On Monday, five weeks before elections, not enough lawmakers were willing to take the political risk of backing a deeply unpopular measure that many voters see as an undeserved bailout for Wall Street fat cats. The bill went down, 228-205, even though Paulson and congressional leaders proclaimed a day earlier that they had worked out an acceptable compromise in marathon weekend talks. Lawmakers were caught in the middle. On one side were dire predictions from President Bush, his economic team and their own party leaders of an all-out financial meltdown if they failed to approve the rescue. On the other side: A flood of protest calls and e-mails from voters threatening to punish them at the ballot box. The House Web site was overwhelmed as millions of people sought information about the measure. The legislation the administration promoted would have allowed the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions. Getting those debts off their books should bolster those companies' balance sheets and make them more inclined to lend and easing one of the biggest choke points in a national credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy, which is already sputtering. Stocks started plummeting on Wall Street even before Monday's vote was over, as traders watched the rescue measure going down on television. Meanwhile, lawmakers were watching them back. 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 final stock carnage was 777 points, far surpassing the 684-point drop on the first trading day after the Sept. 11, 2001, terror attacks. In the House, "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. Several Democrats in close election fights waited until the last moment, then went against the bill as it became clear most Republicans were opposing it. In all, 65 Republicans joined 140 Democrats in voting "yes," while 133 Republicans and 95 Democrats voted "no." The overriding question was what to do next. "The legislation may have failed; the crisis is still with us," said House Speaker Nancy Pelosi, a Democrat, in a news conference after the defeat. "What happened today cannot stand." Republican leader John Boehner said he and others in his party were pained to vote for such measure, but he agreed that in light of the potential consequences for the economy and all Americans, "I think that we need to renew our efforts to find a solution that Congress can support." Those positive comments aside, a brutal round of partisan finger-pointing followed the vote. Republicans blamed the defeat on Pelosi's scathing speech near the close of the debate, in which she said the bailout was necessary because of Bush's economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets. "We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," Boehner said. Rep. Roy Blunt, the Republican whip, or party disciplinarian, estimated that Pelosi's speech changed the minds of a dozen Republicans who might otherwise have supported the plan. That amounted to an appalling accusation by Republicans against Republicans, said Democratic Rep. Barney Frank, chairman of the Financial Services Committee: "Because somebody hurt their feelings, they decide to punish the country." More than a repudiation of Democrats, Frank said, Republicans' refusal to vote for the bailout was a rejection of their own president. Indeed, many Republican lawmakers spurned Bush's urgent calls for action. "We have a gun to our head," said Rep. Ginny Brown-Waite, a Florida Republican who opposed the bill. "This isn't legislation - it's extortion." The two men campaigning to replace Bush watched the situation closely from afar and afterward demanded action. In Iowa, Republican John McCain declared, "Now is not the time to fix the blame; it's time to fix the problem." In Colorado, Democrat Barack Obama said, "Democrats, Republicans, step up to the plate, get it done." The US Chamber of Commerce said opponents of the bailout would pay for their position. "Make no mistake: When the aftermath of congressional inaction becomes clear, Americans will not tolerate those who stood by and let the calamity happen," said R. Bruce Josten, the Chamber's top lobbyist, in a letter to House members. The conservative Club for Growth made a similar threat to supporters of the bailout. "We're all worried about losing our jobs," Republican Rep. Paul Ryan 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 had 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.