[Vision2020] US House Votes Against Bailout

[Tom Hansen]

I stand corrected, Mr. Moffett.

This Bailout Bill, did in fact fail.

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>From CNN at:

http://www.cnn.com

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Bailout plan rejected

House leaders scramble for support for controversial Wall Street plan.

NEW YORK (CNNMoney.com) -- The fate of a controversial $700 billion 
financial bailout plan was in doubt Monday as a House vote turned against 
it.

The next steps were not immediately clear but supporters were scrambling 
to put it up for another vote.

What was supposed to be a 15-minute vote stretched past the half-hour mark 
as leadership scrambled for support. Investors who had been counting on 
the rescue plan sent the Dow Jones industrial average down as much as 700 
points while watching the measure come up short of the necessary support, 
before rebounding slightly. The key stock reading was down more than 500 
points.

The measure needs 218 votes for passage. Democrats voted 141 to 94 in 
favor of the plan, while Republicans voted 65 to 133 against. That left 
the measure with 206 votes for and 227 against.

A four-hour debate included impassioned pleas for and against the measure 
from Democrats and Republicans alike. Even some of those arguing the 
legislation must be approved were quick to point out problems with it.

But in the end, the vote began with both Democratic and Republican 
leadership telling their members the only way to protect the economy from 
a spreading credit crunch was to vote for the difficult to swallow measure.

"Our time has run out," said Rep. Spencer Bachus, the ranking Republican 
on the House Financial Services Committee. "We're going make a decision. 
There are no other choices, no other alternatives."

The vote comes after lawmakers and the Bush administration finalized 
legislation following a weekend of high-stakes negotiations over the 
controversial measure, which is designed to get battered U.S. credit 
markets working normally again.

"Today is the decision day," said Barney Frank, D-Mass., on the House 
floor. "If we defeat this bill today, it will be a very bad day for the 
financial sector of the American economy and the people who will feel the 
pain are not the top bankers and top corporate executives but average 
Americans."

House Minority Leader John Boehner told his members, many of whom objected 
the measure, that the had accept something he and many of them found 
distasteful.

"If I didn't think we were on the brink of an economic disaster it would 
be the easiest thing to say no to this," Boehner said. But he said 
lawmakers needed to do what was in the best interest of the country.

Leading House Republicans signed on to the proposal on Sunday after 
expressing earlier reservations. Senate Majority Leader Harry Reid said 
Sunday he hoped for a vote in that chamber by Wednesday at the latest.

Earlier on Monday, President Bush and Federal Reserve Chairman Ben 
Bernanke hailed the measure and urged Congress to move quickly to pass it.

Bush, speaking at the White House, called the proposed measure "an 
extraordinary agreement to deal with an extraordinary problem." He said he 
is confident the measure will win bipartisan support.

"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," Bush 
said.

Bush acknowledged that many voters were opposed to helping out Wall Street 
with tax dollars, but said there is little choice to move forward with the 
plan. He said most if not all of the tax money spent to buy distressed 
mortgage-backed securities should be recouped when the Treasury sells them 
in the coming years.

"Every member of Congress and every American should keep in mind - a vote 
for this bill is a vote to prevent economic damage to you and your 
community," Bush said.

Bernanke, who had spent hours before Congress last week testifying in 
favor of the measure, issued a brief statement promising that it would 
restore the flow of credit to households and businesses. "I look forward 
to swift passage of the legislation," he said.

Buying troubled assets
The core of the bill is based on Treasury Secretary Henry Paulson's 
request for authority to purchase troubled assets from financial 
institutions so banks can resume lending and so the credit markets, now 
virtually frozen, can begin to operate more normally.

But Democrats and Republicans - concerned about the potential cost - have 
added several conditions and restrictions to protect taxpayers on the down 
side and give them a chance at some of the potential upside if the 
companies benefit from the plan.

Key negotiators for the financial rescue plan were e busy trying to line 
up votes on Capitol Hill on Sunday. House Majority Leader Steny Hoyer, D-
Md., told CNN he believes a majority of representatives on both sides of 
the aisle can and will support the bill.

On Sunday evening, the House Republican working group, which stringently 
opposed earlier drafts of the plan and offered a counterproposal, 
indicated it would support the bill, and its members are encouraging other 
Republicans in the House to do the same.

"Nobody wants to have to support this bill, but it's a bill that we 
believe will avert the crisis that's out there," House Minority Leader 
John Boehner, R-Ohio, told reporters.

But the bill did draw some opposition during the morning debate.

Rep. John Culberson, R-Texas, said the measure would leave a huge burden 
on taxpayers. "This legislation is giving us a choice between bankrupting 
our children and bankrupting a few of these big financial institutions on 
Wall Street that made bad decisions," he said.

Other conservative Republicans argued the bill would be a blow against 
economic freedom.

Thaddeus McCotter, R-Mich., said the bill posed a choice between the loss 
of prosperity in the short term or economic freedom in the long term. He 
said once the federal government enters the financial market place, it 
will not leave. "The choice is stark," he said.

But there were also Democrats who opposed the bill for not doing enough to 
help those who taxpayers facing foreclosure or needing unemployment 
benefits extended, or taxing Wall Street to pay for the rescue package.

"Like the Iraq war and patriot act, this bill is fueled by fear and 
haste," said Lloyd Doggett, D-Texas.

The crisis and a proposed fix
Banks and Wall Street firms, worried about both their own needs for cash 
and the condition of other institutions, essentially stopped loaning money 
to one another in recent weeks. That choked off the money being made 
available on Main Street in the form of mortgage loans, business loans and 
other consumer borrowing.

The crisis stems from problems in mortgage-backed securities, which saw 
their value plunge as home prices have gone into their worst slide since 
the Great Depression and foreclosures have soared to record levels. In 
turn, the market for trillion of dollars worth of those securities held by 
major firms evaporated, sending them down to fire sale prices and raising 
the risk of widespread failures among the nation's major financial firms.

Under the plan, Treasury will buy the mortgage backed securities, either 
directly from the firms or through an auction process. It may also arrange 
to provide guarantees for the securities up to their original values in 
return for premiums they would charge current holders of the securities.

To make the legislation more politically palatable, the bill calls for the 
government, as an owner of a large number of mortgage securities, to exert 
influence on loan servicers to modify more troubled loans to help prevent 
additional foreclosures. It also provides that the government will take 
equity in the firms that sell the securities to the government, and limits 
pay packages for top executives.

The legislation comes amid great upheaval in the nation's financial 
system. On Monday morning, the Federal Deposit Insurance Corp., which 
insures deposits at failed banks, arranged for the sale of the banking 
assets of Wachovia (WB, Fortune 500), the nation's No. 4 bank holding 
company, to Citigroup (C, Fortune 500) for $2.2 billion in stock.

That follows three weeks of other shocks: the Treasury Department's 
seizure of mortgage finance firms Fannie Mae (FNM, Fortune 500) and 
Freddie Mac (FRE, Fortune 500); Wall Street firm Lehman Brothers' 
bankruptcy filing; rival Merrill Lynch (MER, Fortune 500) purchase by Bank 
of America (BAC, Fortune 500).

In addition, the Fed bailed out insurance giant American International 
Group (AIG, Fortune 500), loaning it $85 billion in return for a nearly 
80% stake. while Washington Mutual (WM, Fortune 500), the nation's largest 
savings and loan, became the largest bank failure in history.

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Seeya round town, MOscow. 

Tom Hansen
Moscow, Idaho


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