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House defeats bailout; Dow drops
Walz votes against Bush’s plan
Published Tuesday, September 30, 2008
WASHINGTON — In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation’s financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it. The Dow Jones industrials plunged nearly 800 points, the most ever for a single day.
Democratic and Republican leaders alike pledged to try again, though the Democrats said GOP lawmakers needed to provide more votes. Bush huddled with his economic advisers about a next step. The House was to reconvene on Thursday instead of adjourning for the year as planned.
Stocks began falling even before the 228-205 vote to reject the bill was officially announced on the House floor. The 778-point decline for the day surpassed the 684-point drop on the first trading day after the Sept. 11, 2001, terror attacks.
First District Congressman Tim Walz, D-Mankato, voted against the bailout plan.
Tim Walz
“In the last week, I’ve personally called over 100 constituents, bankers and business leaders in southern Minnesota to sound them out about this bailout package. The message I’ve heard from them is clear: despite the many and significant improvements made by Democratic negotiators, this bill still falls short,” Walz said.
Treasury Secretary Henry Paulson looked grim afterward, if not shaken. “We need to work as quickly as possible,” he said. “We need to get something done.” He went on: “We need to put something back together that works.” Looking to inject a note of confidence into a day of high anxiety, he offered: “Our banking system has been holding up very well, considering all of the pressures.”
In the House chamber, as a digital screen recorded a cascade of “no” votes against the bailout, Democratic Rep. Joe Crowley of New York shouted news of the falling stocks. “Six hundred points!” he yelled, jabbing his thumb downward.
Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite loud protest from their constituents back home. Not enough members were willing to take the political risk just five weeks before an election.
More than two-thirds of Republicans and 40 percent of Democrats opposed the bill. In all, 95 Republicans joined 140 Democrats in voting “yes,” while 133 Republicans and 65 Democrats voted “no.”
The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign for the election that is just five weeks away.
“The legislation may have failed; the crisis is still with us,” said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.
“What happened today cannot stand,” Pelosi said. “We must move forward, and I hope that the markets will take that message.”
Walz said Pelosi deserves credit for protections that made it into the bill. His staff said another bill likely will return later this week with more protections for investors.
At the White House, Bush said, “I’m disappointed in the vote. ... We’ve put forth a plan that was big because we’ve got a big problem.” He pledged to keep pressing for a measure that Congress would pass.
“My job is to protect the American taxpayer and this plan doesn’t go far enough in looking out for the middle class. It doesn’t go far enough in holding Wall Street accountable. If Wall Street is going to get our money, we need to have some protections in place, and this plan doesn’t go far enough.” Walz said. “Finally, it does not do enough to help address the real cause of our economic crisis: the tidal wave of foreclosures that are hurting families and neighborhoods all around the country.”
Republicans blamed Pelosi’s scathing speech near the close of the debate — which attacked Bush’s economic policies and a “right-wing ideology of anything goes, no supervision, no discipline, no regulation” of financial markets — for the vote’s failure.
“We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House,” Minority Leader John Boehner said. Pelosi’s words, the Ohio Republican said, “poisoned our conference, caused a number of members that we thought we could get, to go south.”
Rep. Roy Blunt, R-Mo., the whip, estimated that Pelosi’s speech changed the minds of a dozen Republicans who might otherwise have supported the plan.
That was a remarkable accusation by Republicans against Republicans, said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee: “Because somebody hurt their feelings, they decided to punish the country.”
The presidential candidates kept close track — from afar.
In Colorado, Democrat Barack Obama said, “Democrats, Republicans, step up to the plate, get it done.”
Republican John McCain spoke with Paulson and Federal Reserve Chairman Ben Bernanke before leaving Ohio for a campaign stop in Iowa, a spokeswoman said.
The legislation the administration promoted would have allowed the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies’ balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy that is already sputtering.
Monday’s action had been preceded by unusually aggressive White House lobbying, and Fratto said that Bush had been making calls to lawmakers until shortly before the vote.
Bush and his economic advisers, as well as congressional leaders in both parties had argued the plan was vital to insulating ordinary Americans from the effects of Wall Street’s bad bets. The version that was up for vote Monday was the product of marathon closed-door negotiations on Capitol Hill over the weekend.
“We’re all worried about losing our jobs,” Rep. Paul Ryan, R-Wis., 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.”’
Said Boehner, after the vote: “Americans are angry, and so are my colleagues. They don’t want to have to vote for a bill like this. But I have concerns about what this means for the American people, what it means for our economy, and what it means for people’s jobs. I think that we need to renew our efforts to find a solution that Congress can support.”
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Comments
Posted by NoDFL (anonymous) on September 29, 2008 at 4:49 p.m. (Suggest removal)
Waltz you did the right thing for once. Nanny P shame on you I thought we were all in this together yet you couldn't wait to make political hay. Looks like it bit you on the butt.
Posted by NoDFL (anonymous) on September 29, 2008 at 6:13 p.m. (Suggest removal)
Everyone needs to watch this
http://www.youtube.com/watch?v=TxgSubmiG...
Posted by OldTrojan (anonymous) on September 29, 2008 at 6:29 p.m. (Suggest removal)
Good video! My only complaint is the remake of Free Fallin' by Tom Petty is not very good.
Posted by NoDFL (anonymous) on September 29, 2008 at 6:34 p.m. (Suggest removal)
True.... Scary I had heard this but can't believe it's true. I never thought people would sell out our country like this.
Posted by trifid (anonymous) on September 29, 2008 at 7:49 p.m. (Suggest removal)
Some in congress finally did what the people asked them to do. I am stunned that some of them may have actually listened to us.
Let the markets fall. I want to see Wallsreet squirm. This country is more than Wallstreet....at least it should be.
Personally, I have very little to lose, and much to gain. The corporate thugs should be made to suffer and sweat as long as possible!
And in the end what will be learned?--that American's love affair with corporate elitists and their chains of debt was ill-conceived? No, the cycle will begin again in greed induced delirium. Such are humans.
Way to go, Tim Walz!!
My advice: let us keep the pressure on! The longer we bargain the better deal average americans will reap.
Posted by jeshuaerickson (Jeshua Erickson) on September 29, 2008 at 8:02 p.m. (Suggest removal)
Yes, very thought-provoking video. I'll be checking out a few Wikipedia articles about this.
I'm glad Tim Walz voted "no" on the bailout. We may yet see some terrible fallout as a result, but it has to happen sooner or later. Our indebtedness has gotten out of hand.
Posted by NoDFL (anonymous) on September 29, 2008 at 9:14 p.m. (Suggest removal)
I can not believe that Mr. Walz went against his party. He took a stand. I mean wow he took a stand. There will be real pain. My questions is why can't they just change some of the rules. Just take the bad paper out of the mix. Leave the tight controls on who gets loans. Move the paper so that it won't count against the money they have to loan. Let's try that.
We are all going to feel this for a long time but it may be time for some tough love. Please pass that link on to everyone the truth needs to be heard.
Posted by gone (anonymous) on September 30, 2008 at 6:35 a.m. (Suggest removal)
This is about the failure of the underlying financial markets, not necessarily Wall Street per se. It's a not a failure of Wall Street. Wall Street performance is simply a reflection of the diminishing lines of credit for businesses to borrow the money they need to operate. The lack of regulation such as underwriting guidelines for real estate loans is where it started. Republicans are anti-regulation; this is what happens where good financial regulation is not in place. You heard Bush say it in his speech last week...he is a free market advocate and does not wish to intervene but now is is so screwed up that he must. Now the Republicans want the buyout. The Republican money changers made their $$ when there was inadequate regulation and now they make it on the buyout. The Speaker of the House was simply reminding congress that despite the need for a bipartisan buyout to stall further collapse, the underlying cause was a lack of regulation. A few Republicans could not handle the truth and pouted putting the average person further at risk.
Posted by Disgusted (anonymous) on September 30, 2008 at 8:18 a.m. (Suggest removal)
gone, do you actually believe what you have written? Do you really believe that the Republican party wants everybody to have a home whether they have money or not? The party of liberals, socialists, communists, and other special interest groups is responsibile for this fiasco.
Posted by regulators (anonymous) on September 30, 2008 at 8:39 a.m. (Suggest removal)
"NoDFL" and many other conservatives are oblivious. Did you see their plan? It featured suspending capital gains taxes (like investors would really dash to invest in the bank’s toxic paper), and they called for MORE deregulation, allowing banks to hide the current value of their assets by suspending accounting rules that mark assets to the actual market price. This actually made it into the final bill!!
Do you really believe altering banks books would increase confidence in Wall Street?
Instead of pandering to the conservatives, I hope Democrats craft a bold plan that deals with the real problems.
Posted by Truth (anonymous) on September 30, 2008 at 10:01 a.m. (Suggest removal)
As an independent I believe the Democrats are the ones who caused this with their big bold plans of the 1970s, the 1990s and blocking the very regulation that would have stop that. So please please no more bold plans the country can't take it. Also Nancy P did not help nor do you by saying it is failed Bush policy.
Lastly people do not trust congress. Only 19% approve of them. People will not buy anything they are trying to sell even if it would help them.
Posted by regulators (anonymous) on September 30, 2008 at 12:49 p.m. (Suggest removal)
"Democrats are the ones who caused this with their big bold plans."
The mortgage/credit crisis has many causes. Truth, I know you are a self proclaimed economist but let me remind you of several factors besides democrats per Wall St Journal:
- The Federal Reserve. The original sin of this crisis was easy money. For too long this decade, especially from 2003 to 2005, the Fed held interest rates below the level of expected inflation, thus creating a vast subsidy for debt that both households and financial firms exploited. The housing bubble was a result, along with its financial counterparts, the subprime loan and the mortgage SIV.
- A credit-rating oligopoly. Thanks to federal and state regulation, a small handful of credit rating agencies pass judgment on the risk for all debt securities in our markets. Many of these judgments turned out to be wrong, and this goes to the root of the credit crisis
- Banking regulators. In the Beltway fable, bank supervision all but vanished in recent years. But the great irony is that the banks that made some of the worst mortgage investments are the most highly regulated.
Truth - so much for your claim of an Independent when you and I both know everyone is to blame for this mess. If you really believe Democrats are to blame, you don't know the facts.
Posted by demo1960 (anonymous) on September 30, 2008 at 1:05 p.m. (Suggest removal)
I agree with Tim Walz that there needs to be more protection in this bill but something needs to be passed. Listen to the financial experts and not the president or congressmen and senators. It is the credit crunch that will cause problems. No credit for small business and we will have businesses closing and employees out of work. When there is high unemployment, we have more people with no health coverage (if you are not working Cobra is not an option), less money to spend in shops and restaurants etc. If you can't get a loan for a car or furniture these businesses will suffer, thus employees will be laid off. It will have a ripple effect and everyone will soon feel it. It is not your typical disaster that happens in front of your eyes like a hurricane or tornado. If you know anyone or are related to anyone that works for a small business (and that covers most of Albert Lea), remember those persons when you call your congressman/senator and
demand he/she vote no. I realize Pres Bush is less than convincing when he gives his 10 minute speeches every other day. Instead he should have a group of bipartisan experts that we all trust to speak to the American people. We are supposed to be attracting business to Albert Lea, but instead we have one plant laid off, and at least 4 small businesses that have closed.
Posted by demo1960 (anonymous) on September 30, 2008 at 1:07 p.m. (Suggest removal)
PS We can figure out how to blame later.
Posted by wingo (anonymous) on September 30, 2008 at 4:29 p.m. (Suggest removal)
Don't you all think that the Wall Street CEO's need to have some blame in this too. I'm not blaming any party, I think the big shots on Wall Street are sticking it to us all.
Posted by NoDFL (anonymous) on September 30, 2008 at 5:23 p.m. (Suggest removal)
Reg,
Here is some info for you to chew on. You are attacking Truth with no clue who he is. Lets start with this The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.) is a United States federal law that requires banks and savings and loan associations to offer credit throughout their entire market area. The CRA was passed by the 95th United States Congress and signed into law by President Jimmy Carter in 1977 as a result of national grassroots pressure for affordable housing, and despite considerable opposition from the mainstream banking community.The CRA mandates that each banking institution be evaluated to determine if it has met the credit needs of its entire community. That record is taken into account when the federal government considers an institution's application for deposit facilities, including mergers and acquisitions after the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 repealed restrictions on interstate banking.
In early 1993 President Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities.[5] The new rules went into effect on January 31, 1995 and featured: requiring strictly numerical assessments to get a satisfactory CRA rating; using federal home-loan data broken down by neighborhood, income group, and race; encouraging community groups to complain when banks were not loaning enough to specified neighborhood, income group, and race; allowing community groups that marketed loans to targeted groups to collect a fee from the banks.
Posted by NoDFL (anonymous) on September 30, 2008 at 5:27 p.m. (Suggest removal)
Part 2
Economist Stan Liebowitz notes that the Fannie Mae Foundation singled out Countrywide Financial as a "paragon" of a nondiscriminatory lender who works with community activists, following "the most flexible underwriting criteria permitted." The chief executive of Countrywide is said to have "bragged" that in order to approve minority applications, "lenders have had to stretch the rules a bit." Countrywide's commitment to low-income loans had grown to $600 billion by early 2003.
In order to try to diversify the risk of these loans, the Federal Home Loan Mortgage Company ("Freddie Mac") pioneered the "securitization" of bundles of these high-risk loans so that they could be sold on secondary markets. Such "securitization" exploded during the 1990s as a result of government regulation. As Fed Chairman Ben Bernanke himself stated in a March 30, 2007 speech entitled "The Community Reinvestment Act: Its Evolution and New Challenges" (published online by the Fed),
Securitization of affordable housing loans expanded, as did the secondary market for these loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a large percentage of their activities to meeting affordable housing goals. (p. 3)
The government also "streamlined" the regulatory requirements for CRA loans in 1995, allowing — and indeed pressuring — banks to make such loans without the benefit of many traditional credit-worthiness criteria, such as the size of the mortgage payment relative to income, savings history, and even income verification! Instead, the Fed told banks that participation in a credit-counseling program, many of which are federally funded, could be used as "proof" of a low-income applicant's ability to make his mortgage payments. In other words, federal bank regulators required banks to make bad loans based on nonexistent credit standards.
Posted by NoDFL (anonymous) on September 30, 2008 at 5:28 p.m. (Suggest removal)
part 3
A man named Bruce Marks became quite notorious during the last decade for pressuring banks to earmark literally billions of dollars to his organization, the "Neighborhood Assistance Corporation of America." He once boasted to the New York Times that he had "won" loan commitments totaling $3.8 billion from Bank of America, First Union Corporation, and the Fleet Financial Group. And that is just one "community group" operating in one city – Boston.
Banks have been placed in a Catch 22 situation by the CRA: If they comply, they know they will have to suffer from more loan defaults. If they don’t comply, they face financial penalties and, worse yet, their business plans for mergers, branch expansions, etc. can be blocked by CRA protesters, which can cost a large corporation like Bank of America billions of dollars. Like most businesses, they have largely buckled under and have surrendered to their bureaucratic masters.
Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as "subprime" loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans.
But this is discriminatory!, complained the "community organizations." Thus, if one browses the ACORN web site, one can read of their boasts of having "predatory lending laws" passed in numerous states which outlaw such fees, prohibiting banks from protecting themselves from the added risk involved in making forced loans to "subprime" borrowers.
and hot off the wire Bill Clinton on Thursday told ABC's Chris Cuomo that Democrats for years have been "resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac"
So reg time to fess up the Dems are to blame.
Posted by Free (anonymous) on September 30, 2008 at 5:33 p.m. (Suggest removal)
This is a copy of a video segment aired about who is to blame. Take it as you wish.
BRIT HUME, HOST: In the recent spate of government bailouts, buyouts and rescues, the federal takeovers of mortgage giants Fannie Mae and Freddie Mac are arguably the biggest of them all. And those two firms are also arguably the biggest reason for the credit crisis in the first place. So the question arises -- how did this come to be? Chief Washington correspondent Jim Angle reports.
(BEGIN VIDEOTAPE)
JIM ANGLE, CHIEF WASHINGTON CORRESPONDENT (voice-over): There is one nagging question behind all the debate over how to get out of this mess.
CHRIS DODD (D-CT), SENATE BANKING COMMITTEE CHMN: American taxpayers are angry and they demand to know how we arrived at this moment.
ELIZABETH DOLE (R), NORTH CAROLINA SENATOR: My constituents, and indeed taxpayers across the nation are asking how we arrived at this crisis. It is infuriating.
ANGLE: But Senator Dole and others think they know the answer, and it's something the Senate tried to fix three years ago but was thwarted.
DOLE: To the mismanagement of Fannie Mae and Freddie Mac, which was made possible by weak oversight and little accountability.
MEL MARTINEZ (R), FLORIDA SENATOR: A lot of what we're dealing with today has its origins in Fannie Mae and Freddie Mac.
ANGLE: Fannie Mae and Freddie Mac, backed by the federal government, buy mortgage loans from the lenders who make them. But four years ago, both were in trouble over shoddy accounting. Fannie Mae Chief Franklin Raines, President Clinton's former budget director, was fired. To placate those in Congress who watched over them, Fannie and Freddie promised to do more to help poor people get mortgages. That led them to buy riskier and riskier home loans from private lenders creating incentives for everyone to make shakier loans.
PETER WALLISON, AMERICAN ENTERPRISE INSTITUTE: The problem is that they encouraged very bad mortgages to be made by banks and other institutions, because Fannie and Freddie would buy them.
ANGLE: Eventually, they bought trillions of dollars worth of mortgages, a substantial portion of them based on poor credit, then resold many of them to financial institutions who thought they were safe because the federal government was behind them.
WALLISON: As a result of this appearance that they were backed by the government, people never paid very much attention to the assets they were acquiring or the risks they were taking.
Posted by Free (anonymous) on September 30, 2008 at 5:34 p.m. (Suggest removal)
part 2
ANGLE: And so shaky mortgages spread throughout the system. But in 2005, the Senate Banking Committee, then chaired by Republican Richard Shelby, tried to rein in the two organizations bypassing some strong new regulations.
WALLISON: Which would have prevented Fannie and Freddie from acquiring this bad -- these bad mortgages. It actually gave a new regulator for Fannie and Freddie the kinds of powers that a bank regulator had.
ANGLE: All the Republicans voted for it. All the Democrats, including the current chairman, Senator Chris Dodd, voted against it, and that was after Fed Chairman Alan Greenspan had issued a stark warning to senators that Fannie and Freddie were playing with fire. Greenspan said without stronger regulations, "We increase the possibility of insolvency and crisis. Without restrictions on the size of Fannie Mae and Freddie Mac, we put at risk our ability to preserve safe and sound financial markets in the United States."
(END VIDEOTAPE)
ANGLE: Which turned out to be exactly right, but because Democrats blocked it, those new regulations never got consideration by the full Senate and died. So that's how we got into this mess, and how we missed a chance to avoid it. Getting out of it now, of course, will be a lot more difficult -- Brit.
HUME: Oh, boy. Thanks, Jim.
Posted by regulators (anonymous) on September 30, 2008 at 7:10 p.m. (Suggest removal)
No DFL - I understand what you are saying and believe you are on to something. You just need to keep digging and learn more about the situation.
Fred&Fannie did help fuel the housing bubble!
To say this financial disaster is due to Fred&Fannie is ridiculous. It's true to say F&F contributed to the current problem by their irresponsible lending practices but the "private sector" contributed far more than F&F.
The number of "private issued mortgages" (ie. not F&F) exploded btw 2002- 2007. Many banks, US and around the world, helped fund sub prime lending because of the potential high returns.
F&F were only a piece of the pie...
The truth is many Democrats can be linked to F&F, although so can many Republicans. They all share in the blame for this piece of the mess.
Youtube video's and Fox News (along with any media) must be taken with a grain of salt. These sources do not give the listener a chance to think for themselves. Your sources are all opinion and only facts that support their agenda.
To sum it up, the credit crisis is not as simple as Fox News would lead you to believe. F&F contributed to the problem and it’s also true Freddie Mac and Fannie Mae was championed by Republicans and Democrats a like.
The “private sector” created most of the mess not F&F.
Posted by NoDFL (anonymous) on September 30, 2008 at 8:01 p.m. (Suggest removal)
First you are correct everything out there is suspect. Yes the private sector is to blame. What my problem is that the 2 sides Gov and Private Sec are now working on this plan. 153 noted economist sent a letter to the Pres, Congress, and the Tres asking them to at the very least to wait or at best do nothing. That should tell us that this plan is a bad idea in it's current form. I know the press is telling me a crash is coming but man if you are right then let the private sector fix it's mistake. I still feel that Government has a huge part in this and I don't trust them to fix it.
Posted by regulators (anonymous) on September 30, 2008 at 9:31 p.m. (Suggest removal)
I know what you mean.
I'm happy Rep. Waltz listened to his constituents and didn't rubber stamp this bill.
Posted by NoDFL (anonymous) on September 30, 2008 at 9:49 p.m. (Suggest removal)
Nice to see we can agree on a few things and I will give Mr. Waltz thanks for doing what is right. Wish the others would listen to us Sen is voting on this on Wed night.
Posted by trifid (anonymous) on October 1, 2008 at 1:29 a.m. (Suggest removal)
It's now clear the sky is not falling, as Washington predicted.
The Senate will probably pass the plan.
Let's keep the pressure on our representatives to take adequate time!
Posted by Truth (anonymous) on October 1, 2008 at 9:05 p.m. (Suggest removal)
We they did it. They passed a huge bill that most did not read. It is filled with pet projects and pork again. Man these guys just don't get it. Hope the house stands firm.
Posted by trifid (anonymous) on October 2, 2008 at 1:57 a.m. (Suggest removal)
Prediction again: the House will pass the bill(a few more additions possible) in order to cover their butts both ways--they can say thay voted down a "bad" plan, while voting for a "better" plan.
My faith in the Senate is crumbling as fast as the retirement accounts.
Hang them by their tails.
Posted by Truth (anonymous) on October 2, 2008 at 12:06 p.m. (Suggest removal)
The house can not change it our it is dead. It must be voted on just as it is written. We are in trouble.
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