Liberals and conservatives snub bailout
When the day began in Washington, Treasury Secretary Paulson and Fed Chairman Bernanke were hopeful their massive financial rescue plan was on its way to becoming law. The House had other ideas. Steve Henn reports on what went wrong.
Treasury Secretary Henry Paulson during the news conference announcing a federal takeover of Fannie Mae and Freddie Mac. (Brendan Hoffman/Getty Images)
More on The Economy, Wall Street, Politics, Fed. Budget/Govt. Spending, America's Financial Crisis
TEXT OF STORY
Henry Paulson woke up this morning set to become the most powerful man in Washington. Sounds like an exaggeration, I know, but it's really not too far from the truth. The bill that Congress rejected today would've given him unprecedented new powers over the markets. But lawmakers clearly had other ideas.
From Washington, Marketplace's Steve Henn has more on the day's events.
When Bernake and Paulson asked for $700 billion, everyone knew it would be a tough sell. But the stakes were enormous. Steve Bartlett is president of the Financial Services Round Table.
Steve Bartlett: No one likes it but it is about the economy and it's about the economy of 340 million Americans.
Paulson tried to craft a plan that would satisfy moderates in both parties. It didn't work. At about 1:45 eastern time, Wall Street and Washington stood still. The massive bailout of the financial services industry was clearly in trouble. Ninety-four liberal Democrats like Congresswomen Lynn Woosley were against it.
Lynn Woosley: Why isn't wall street paying for the mess they created?
They were joined by more than 100 conservative Republicans like Texas Congressman Jeb Henserling.
Jeb Henserling: I fear that ultimately it may not work.
The rank and file were revolting. Paulson, Bernanke, the president and the leaders of both parties in Congress had lost control. By 2:15 they had lost the vote. Steve Bartlett at the Financial Services Roundtable, was deeply disappointed.
Bartlett I do think there is a lot of anger. But I think the level of sort of quiet, hidden majority support for solving the problem is even greater.
But today, the industry and its allies in Washington were fighting off a revolt on two fronts. Liberals and conservatives in Congress both hate this rescue plan for different reasons, and they want different things in end. Liberals like Woosley believe the federal government completely failed to regulate the banking industry and protect consumers. Conservatives see the roots of the crisis in Fannie Mae and Freddie Mac. They believe those two firms were too close to the government, grew too big and took too many risks. For Henserling, the idea of an even bigger government role in the banking industry is a non-starter.
Henserling: That does put us on the slippery slope to socialism.
And today, free-market conservatives like him found the unlikeliest of allies in big government liberals like Woosley. For a few minutes they found one thing in common. This bailout package was bad news.
In Washington, I'm Steve Henn from Marketplace.
Comments
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From Redlands, CA, 09/30/2008
Joe "Seephus", BAC still hasn't taken Countrywide onto its books. So it still does exist.
Do you work for the taxpayer?
Liquidity won't force banks to lend. Wake up. It's corporate welfare and the house will continue to hold strong.
There will be loser. . . .
From Los Angeles, CA, 09/30/2008
I understand that people are blaming the "greedy financial companies" as the source for all of these present problems but they really need to get over it. Why? Because most of the "greedy financial companies" that caused the present housing/credit crises are no longer around! Do they want to blame the mortgage companies, like Countrywide, because they floated mortgages that they knew were bad? They are pretty much all gone or are wholly owned subsidiaries of another company. Do they want to blame the buyers who lied or provided little or no documentation to get a mortgage? They probably have walked away from the property they purchased or have been foreclosed upon. Maybe they should go after the banks that bought and traded the mortgages like WAMU or IndyMac. Those banks are gone and have been taken over by the FDIC or another bank! I guess they can always go after the private investment banks on Wall Street like Bear Sterns or Lehman Brothers...but there aren't any private investment banks on Wall Street anymore. They have all merged with a bank or have become bank holding companies.
The people to blame are gone. If the U.S. Government and the taxpayers don't come up with a plan to stop the credit crises then the U.S. economy will be gone too.
From CA, 09/29/2008
The bill was attached to "Earnings assistance and tax relief for volunteer firefighters and peace corps", so it was a little tricky to find.
For information about how your own representative voted on this bill, it is available here:
http://clerk.house.gov/evs/2008/roll674.xml
Might want to give your representative a call if you think they got it wrong or right since that seems to be driving the decision making.
From Cave Creek, AZ, 09/29/2008
If the economy needs a bail out; let’s deliver it via the tax payers rather than the banks. Let’s inject liquidity using something similar to the economic incentive package by using “Stimulus Payments” of about $5,000 per tax payer. This number is calculated by dividing the proposed $700 Billion by the approximate number of U.S. Taxpayers of 138 Million yielding $5072 per tax payer. (Of course this number would be a little higher if we left out the million or more mortgage holders that are, or soon will be, in default on their loans; after all, they and corrupt financial industry representatives are responsible for this problem.) The recent “Stimulus Payments” of $600 proved to have some beneficial effects; perhaps giving $5000 to each tax payer would yield a very dramatic effect.
Now it is clear that not all of the money would be put into the banking system, but much would. Many of us are more than a little concerned about our individual financial futures and we will put the entire amount into savings. This would represent an injection of liquidity into the banking system.
Some of us would like to reduce the burden of our home mortgages and/or other debt and use the money to pay down these loans. This would also have the effect for injecting liquidity in that it would free up dollars in the financial system.
And still others would simply spend the money doing what Americans do best, consuming as usual. This will have the effect that was desired for the current $600 “Stimulus Payments”.
My personal feelings are that this situation was caused by greedy financial companies, et al., providing loans to people who probably knew they were getting in over their heads but were gambling that they could pull it off and now they find themselves facing the cold hard truth that they gambled too much and lost. You could argue that the root cause was deregulation; and perhaps you’d be correct. But, it was unethical and/or risk-taking individuals who abused the lack of regulation, and they should be the ones paying the price. That is why I believe it would be better to provide liquidity via tax payers—responsible tax payers—and leave the banks and their high-risk debtors to work things out without direct Government (tax payer) help.
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