What happened? And what's next?
The Dow fell a dramatic 777 points today -- the worst plunge in two decades -- on news that the House rejected the $700 billion bailout plan. Kai Ryssdal asks two members of Congress to help make sense of it all.
House Financial Services Committee Chairman Barney Frank is swarmed by reporters after the vote failed on the bailout situation (83052209)
More on The Economy, Wall Street, Politics, Fed. Budget/Govt. Spending, America's Financial Crisis
TEXT OF STORY
Kai Ryssdal: "Now what?" is a fair question to be asking at this point. And we will do just that with two people voted no on the plan that failed today. We'll try to figure out why Henry Paulson couldn't carry the day. And forget about a 777-point loss on the Dow. We will introduce you to the really scary part of the market -- short-term credit.
The final vote in the House today was 205 yeas; 228 nays. Despite pleas from both Speaker Nancy Pelosi and the minority leader John Boehner, there were significant numbers of no votes from both sides of the aisle. What we're going to do for the next couple of minutes is try to figure out why. We spoke earlier today with Congresswoman Marilyn Musgrave. She's a Republican from Colorado, the eastern part of the state, and she was in the "no" majority today.
Marilyn Musgrave: Sure we should look at Wall Street and help them work their way out of this problem, but not at the expense of the taxpayer. The taxpayers shouldn't have to bail them out.
Ryssdal: There were more Democrats voting no today than Republicans, more than would be suggested even by the majority that the Democrats enjoy. One of those no votes came from Representative Peter DeFazio. He's a Democrat from Oregon. Congressman, good to have you with us.
Peter DeFazio: Thank you.
Ryssdal: What was it about this bill you didn't much care for?
DeFazio: Well, I thought the whole premise on which it was based was false, but somehow if the taxpayers borrowed $700 billion and took a bunch of bad debts from Wall Street, that this would bring about liquidity and then ultimately would somehow filter down help Main Street, help housing, help the basic economy. But beyond that, we've heard from William Isaacs, head of the FDIC. He ran it during the last, previous greatest financial crisis in the history of America, savings and loan, and he said a couple of simple steps could deal with the bank liquidity issue.
So I think there are practical proposals out there that just weren't heard. And in addition to that, Paulson didn't at all get, in my mind, to the underlying part of the economy -- the problems in housing and the declining housing market. There are credible economists who said: Hey, if you don't deal with housing, you may be taking care of this week's bad securities, but guess what? Next week, if housing goes down another 5 percent, there's gonna be a whole batch more bad securities out there. You've gotta deal with the underlying problems in housing and the underlying problems in the economy.
Ryssdal: Well, if there had been some kind of relief for homeowners of some kind, mortgage holders of some kind in this bill, would you have supported it.
DeFazio: No, that would be nowhere near enough, because the whole precipice, or you know, foundation on which this thing was built was faulty; again in my mind, borrowing the money and throwing it at the top.
Ryssdal: What do we do now?
DeFazio: I think we all take a deep breath. Bush could, between tonight and tomorrow morning, implement the regulatory changes proposed by Mr. Isaacs. I'm working with Lloyd Doggett from Texas. We're actually drafting legislation that would do that if the President wouldn't do that. We just need to make clear that we intend to take action. This isn't the far right of the Republican Party saying we need to do nothing. There is a, you know, we can put together a majority of the House just on the Democratic side with a good proposal, and I think there's a number of Republicans who'd come along with a better proposal. This one was not a good proposal.
Ryssdal: Do you think Speaker Pelosi made a mistake bringing this one to the floor?
DeFazio: Look, you know, they were handed a really bad starting point. They shouldn't have accepted the premise. Henry Paulson sent down a three-page insult to Congress, saying: You let me either borrow or give me $700 billion -- authorization to print it -- and you get out of the way. That was what he sent down. People said, oh, he's just a tough bargainer. And I said no, that is not a bargaining position, plus I reject the basic premise. We should have put his plan up for a vote on Tuesday last week. It would have gotten zero votes, then we would have been in the negotiating position to push him back. They then started negotiating with him, and, you know, you just can't get very far starting from a failed premise.
Ryssdal: Do you reject the reject the administration's premise that the credit markets are still frozen?
DeFazio: There are apparently problems in the big money parts of the credit market, not yet locally. My credit union's community banks are still lending. They've all, I've been in touch with them. They did say there's a new phenomena where some businesses locally were very solvent are having their credit lines cut off by commercial banks under orders from the FDIC. So the FDIC has to stop making things worse and start thinking about how they can regulate to make things better.
Ryssdal: How's your constituent service phone line been doing this week?
DeFazio: Hasn't stopped ringing. We're getting up over 3,000 phone calls, over 3,000 e-mails running well more than 100-to-1 against it, but that's not what I based my opinions on. I was the first member of the House of Representatives to speak out against this plan last Monday morning.
Ryssdal: Do you think both sides of the leadership misjudged that anger?
DeFazio: Absolutely, and, I think, they were in a rush to pass this before people went home and heard it.
Ryssdal: Peter DeFazio, Democrat of Oregon. Congressman, thanks for your time.
DeFazio: Thank you.
Comments
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From poughkeepsie, NY, 10/01/2008
everyone is blaming wall st. and i can't see why. the fed knew and encouraged the shadow banking system (wonder why when banks make up 1/2 the fed), the politicians took the campaign money and shouted 'no regulations' and 'free market'. fannie and freddie gave the money to the banks who gave it to the people who couldn't afford them. how is it wall st. is to blame? because they bought the mortgages from the banks and sold them? seems to me the fed, the politicians and the banks all made out quite well. fannie, freddie, wall st. and the people got cheated. who's to blame? we are. because we didn't stay informed enough and pro-active enough and allowed the fed, the government, fannie, freddie, the banks, the sec, and finally wall st. to prey on us all.
From San Jose, CA, 10/01/2008
Now when we are facing the biggest financial crisis since 1929, now is not the time for bitterness and blame. I've had it with partisan politics. I want our congressmen and women to face the gravity of the situation together, and work out a solution that would best help our country. Instead of focusing on which party caused the problem, we need to look at what's best for our financial future. It will cost us a lot more in the long run if we don't come together now to work out a solution.
From Edinboro, PA, 09/30/2008
Shame on centrist Democrats and Republicans for letting themselves be stampeded into a taxpayer funded bailout by Bush and hyperventilating financial media spokesmen! I learned about the coming collapse in real estate in a cover story in Harper’s Magazine, May 2006, 28 months ago! These “leaders” pushed the bailout without even one hearing on alternatives like 1) Issa's Guaranteed Recovery Bonds, 2) enacting Financial Transaction Taxes, 3) letting the Federal Reserve, rather than Treasury, buy the questionable debt with new money it creates, 4) prohibiting any kind of future mortgage backed security except European - style covered bonds, and 5) requiring bad security issuers to have larger cash asset reserves. I'm a retired, long-term, small investor with significant unrealized losses. But I'll wait for my investments to recover.
Congress must hold hearings! During them, let the worst purveyors of bad securities be bought or go bankrupt! Voters should de-register from the Democratic and Republican parties. Then, whoever you hold your nose and vote for to be President, voters in their districts should remove these irresponsible centrists (Reid, McConnell, Pelosi, Boehner.) They knew this problem was coming for a long time and didn't stop or mitigate it before!
Robert Cogan
From Charlottesville, VA, 09/30/2008
What's wrong with this picture? NPR continues to broadcast from a presumptive pro-"Wall Street bailout" perspective -- despite the fact that the notion of bailing out the greedy forms is VERY unpopular across the US (as evidenced by the furious phonecalls to House Representatives).
National Public Radio? I don't think so -- National Pandering-to-the-Powerful Radio is more accurate, I think.
I hope this sorry episode enables people in this country to see more clearly what an shameful sham NPR is. Why do you not feature the critics of all stripes to this crime? Bush is stealing the silverware on the way out of the White House, and NPR is effectively supporting it!! Questions you should be focusing on:
How did we get here?
What the impact of the Iraq spending ($14 million an hour according to some)? None? No effect????
What's the role of deregulation over the past 20 years? None????
Why not bail out the mortgage-holders directly?
And -- Why/How does this overgrown fratboy who has stolen elections and lied constantly still have any credibility in this country? A Democratic occupant of the White House would have been hounded out long ago (and with good reason).
Shame on you all.
From Clovis, NM, 09/30/2008
If It's our money(taxpayer), why not take 80bil. distribute it equally to those who pay taxes. Each taxpayer would get more than enough to pay off all credit cards, pay on mortgages and have money left to spend in the local economy. 80bil/300mil=. money spent in local economy would multiply (unless the banks have been lying to me). I would spend my money for value received, and it's the true free market. not a bunch of paper dreams or ponzi schemes.
From Westport, CT, 09/30/2008
People are saying that $700B is an incomprehensible number. Well, let me make this simple. There are currently ~6B people on this earth. Which means we could give ~$100B to each person on this earth with the proposed 'Bailout'.
If we REALLY WANT CHANGE, why don't we give $1 million to each person residing in the US, $2 million to each small business, and $3 million to each small business focused on clean tech in the country, and use the rest to give each resident of this country complete health insurance, fix our education system, fix our infrastructure, fix social security, and save the rest?
Wall St. is a $$ black hole.
THE CONSUMER IS WHAT DRIVES OUR GLOBAL ECONOMY!
THINK.
From Pittsburgh, PA, 09/30/2008
Faced with the single biggest story in the history of your show -- one which is likely to have tremendous political repercussions, coming as is does in the midst of an extremely close presidential race -- you blew it.
First, Kai Ryssdal stated that more Democrats voted against the bailout than Republcans. This is a blatant falsehood; the correct totals of Nay votes are 95 Democrats and 133 Republicans, or 40% of Dems and 67% of Republicans.
Minutes laters, in your second segment, another reporter gave marginally more accurate information about the vote, but again gave the false impression that the two parties were equally responsible for sabotaging the bailout agreement. After accurately reporting the number of Dems voting Nay as 95, your correspondent stated that the Republicans voting Nay totalled over a hundred. The clear implication was that the number of Nay votes was roughly the same on both sides of the aisle, which is simply not true; there were 38 (or 40%) more Nay votes by Republicans than by Dems.
On a day when John McCain took credit for lining up the necessary Republican votes to pass the bailout and then blamed Barack Obama for failing to do enough to support the proposal, it is inexcusable that you would twice misrepresent this momentous vote, thereby lending credence to McCain's highly dubious claims.
What stunningly sloppy and irresponsible journalism!
From Jamaica Plain, MA, 09/29/2008
So riddle me this - is there any movement going forward to hunt down, arrest and freeze the assets of all of the head honchos of these failed companies that have caused this mess? And if not, why not?
From Cypress, CA, 09/29/2008
People in this country need to start looking at the collective well-being rather than only at their own interests. And we all need to start considering the future in our decision-making. We can't continue to enjoy the life of a selfish teenager who has a devil-may-care attitude about the welfare of others and who choose to lives oblivious to responsibility, expecting others to pay for our rich little kid party-animal lifestyle. We can't continue to gamble in the marketplace and expect future generations to bail us out. The lack of knowledge people have about things that affect them is appalling. The same people who don't want to be taxed are the first ones to demand entitlements. And we can't continue to have a working democracy when people vote for someone because they like the way she looks in a bikini or because they feel the guy in the oval office is someone they could have a beer with. It has to be about issues and not just those that affect us now but about what will allow us and our children to have a healthy future
From San Francisco, CA, 09/29/2008
This is actually a good day for the free markets. The problem is that the Fed caused this mess in the first place. The only way to fix the "asset bubble" (which they created through their mismanagement of short-term lending rates) is to let it deflate however painful that may be. We cannot sell our problems to the next four generations. We can only try to learn from this.
From OR, 09/29/2008
Shame on you! This country is in crisis and what do you do? You go on a holiday break? The biggest cause of this crisis is greed and it will not stop until those at the top are forced to salary limits including those in political office. You need to have reasonable salaries and learn to live like the rest of us. Spend some time living in a third world country and find out what life is like for the majority of people in this world. The best thing that could come out of this is limits on salaries for CEO's of all companies and strict limits on lending practices. Anyone who looked at the history of real estate would know that it would all come down sometime based on the type of loans that were being handed out right and left. Stop your partisan politics and worrying about re-election and stand up for what is needed to get this crisis taken care of before there is not country to run.
From Whittier, CA, 09/29/2008
I realize there's tremendous pressure to spread blame equally between both parties but this story seems to just make numbers up.
In order for your key statement ("There were more Democrats voting no today than Republicans, more than would be suggested even by the majority that the Democrats enjoy") to be true the proportion of Democrats voting against the bailout would have had to be higher than the proportion of Rebublicans doing so. There is no other reasonable interpretation of the phrase "suggested even by the majority that the Democrats enjoy."
Tomorrow's show should have either an explanation of these numbers or an apology for them.
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