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U.S. lawmakers went back to the drawing board on Tuesday in an effort to craft a new version of the $700 billion rescue package for the financial markets that the House unexpectedly shot down on Monday in a dramatic show of defiance to President Bush.
With some members of Congress gone for the Jewish New Year holiday, other members of both the House and the Senate were meeting in Capitol Hill offices in a furious attempt to hammer out new language for the defeated bailout plan.
Senate Banking Committee Chairman Christopher Dodd, D-Conn., said he was "hopeful and optimistic" Congress would come up with a plan soon, and Senate Minority Leader Mitch McConnell, R-Ky., agreed that a bill could be finished this week.
The senators' statements come as markets staged a partial recovery from their dizzying 777-point drop on Monday following the House's rejection of the bailout plan, rebounding almost 500 points on Tuesday. See Market Snapshot.
Tuesday morning, a grim-faced President Bush again called on Congress to push through a bailout plan.
"I assure our citizens and citizens around the world that this is not the end of the legislative process," Bush said. "I recognize this is a difficult vote for members of Congress. The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act."
New proposals
With lawmakers now in session past their scheduled recess date, members of Congress are hunkering down and trying to fashion a bill that's palatable to as many members as possible. Meanwhile, regulators and the presidential candidates are also working to address the market crisis. ..
It is our responsibility today, to help avert that catastrophic outcome. Let us be clear: This is a crisis caused on Wall Street. But it is a crisis that reaches to Main Street in every city and town of the United States.
It is a crisis that freezes credit, causes families to lose their homes, cripples small businesses, and makes it harder to find jobs. It is a crisis that never had to happen. It is now the duty of every member of this body to recognise that the failure to act responsibly, with full protections for the American taxpayer, would compound the damage already done to the financial security of millions of American families.
Over the past several days, we have worked with our Republican colleagues to fashion an alternative to the original plan of the Bush administration.
I must recognise the outstanding leadership provided by [the chairman of the House financial services committee and Democrat of Massachusetts] Barney Frank, whose enormous intellectual and strategic abilities have never before been so urgently needed, or so widely admired.
I also want to recognise [Illinois Democratic Republican] Rahm Emanuel, who combined his deep knowledge of financial institutions with his pragmatic policy experience to resolve key disagreements.
Secretary Paulson deserves credit for working day and night to help reach an agreement, and for his flexibility in negotiating changes to his original proposal.
Democrats insisted that legislation responding to this crisis must protect the American people and Main Street from the meltdown on Wall Street.
The American people did not decide to dangerously weaken our regulatory and oversight policies. They did not make unwise and risky financial deals. They did not jeopardise the economic security of the nation. And they must not pay the cost of this emergency recovery and stabilisation bill.
So we insisted that this bill contain several key provisions. This legislation must contain independent and ongoing oversight to ensure that the recovery programme is managed with full transparency and strict accountability.
The legislation must do everything possible to allow as many people to stay in their homes rather than face foreclosure.
The corporate CEOs whose companies will benefit from the public's participation in this recovery must not benefit by exorbitant salaries and golden parachute retirement bonuses.
Our message to Wall Street is this: the party is over. The era of golden parachutes for high-flying Wall Street operators is over. No longer will the US taxpayer bail out the recklessness of Wall Street. The taxpayers who bear the risk in this recovery must share in the upside as the economy recovers.
And should this programme not pay for itself, the financial institutions that benefited, not the taxpayers, must bear responsibility for making up the difference.
These were the Democratic demands to safeguard the American taxpayer, to help the economy recover, and to impose tough accountability as a central component of this recovery effort.
This legislation is not the end of congressional activity on this crisis. Over the course of the next few weeks, we will continue to hold investigative and oversight hearings to find out how the crisis developed, where mistakes were made, and how the recovery must be managed to protect the middle class and the American taxpayer.
With passage of this legislation today, we can begin the difficult job of turning our economy around, of helping those who depend on a growing economy and stable financial institutions for a secure retirement, for the education of their children, for jobs and small business credit.
Today we must act for those Americans, for Main Street, and we must act now, with the bipartisan spirit of cooperation which allowed us to fashion this legislation.
This not enough. We are also working to restore our nation's economic strength by passing a new economic recovery stimulus package, a robust, job-creating bill that will help Americans struggling with high prices, get our economy back on track and renew the American dream.
Today we will act to avert this crisis, but informed by our experience of the past eight years, with the failed economic leadership that has left us less capable of meeting the challenges of the future.
We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a new direction to a better future..
John Boehner, the Republican minority leader, called the measure "a mud sandwich" but urged members to reflect on the damage that a defeat of the measure would mean "to your friends, your neighbors, your constituents" as they might watch their retirement savings "shrivel up to zero."
Sixty-five Republicans joined 140 Democrats in voting for the measure, while 133 Republicans and 95 Democrats voted against it. "The legislation has failed," Speaker of the House Nancy Pelosi said at a news conference after the vote. Some Republicans seemed to blame Pelosi's speech from the floor, which attacked Bush's economic policies, for the defeat.
Defying President Bush and the leaders of both parties, rank-and-file lawmakers in the House on Monday rejected a $700 billion economic rescue plan in a revolt that rocked the Capitol, sent markets plunging and left top lawmakers groping for a resolution.
The stunning defeat of the proposal on a 228-205 vote after marathon talks by senior Congressional and Bush administration officials lowered a fog of uncertainty over economies around the globe. Its authors had described the measure as essential to preventing widespread economic calamity.
The markets began to plummet even before the 15-minute voting period expired on the House floor. For 25 more minutes, uncertainty gripped the nation as television showed party leaders trying, and failing, to muster more support. Finally, Representative Ellen Tauscher, Democrat of California, pounded the gavel and it was done.
Congress scrambles to revise bailout bill, Barack Obama, John McCain ...
... nominees, scrambled Tuesday to find out what changes are needed to sell the failed $700 billion financial system bailout to ... They announced separately that they support a plan that some House Republicans had pushed earlier: raising the federal ...
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Source: New York Daily News
NewsDateTime: 1 hour ago
House Rejection Leaves Wall Street Bailout in a Heap
Once again, it is back to the drawing board for the Treasury's proposed $700 billion rescue plan for the financial industry. In a development that stunned Washington after more than week of intensive negotiations [BusinessWeek.com, 9/28/08]. the ...
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Source: MSN MoneyCentral
NewsDateTime: 6 hours ago
Rep. Van Hollen On Bailout
The House of Representatives voted 228-205 against a compromise bailout plan that would have allowed the Treasury ... Now is the time for all members of Congress to go back to the drawing board," he said.
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Source: CNBC
NewsDateTime: 8 hours ago
Paulson May Find Turmoil Helps Renew Push for Bailout (Update1)
... plunge in two decades and a deepening credit-market freeze than personal persuasion to sell his bank bailout plan to ... Republican John McCain urged lawmakers to ``go back to the drawing board'' and come up with legislation that will pass.
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Source: Bloomberg
NewsDateTime: 6 hours ago
9 Michigan reps vote no on bailout
... 205 on Monday, pushing the Dow Jones Industrial Average down 777 points and sending congressional leaders back to the drawing board ... after Fed takeover nightmare Shocking defeat for bailout; record stock dip Stocks tumble as House rejects bailout plan ...
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Source: Detroit News
NewsDateTime: 7 hours ago
McCain, in an appearance this morning on "Fox and Friends," offered a few proposals of his own including: the same increase on FDIC insurance on deposits proposed by Obama, tapping the "exchange stability fund" at Treasury for $250 billion to shore up financial institutions and urging Treasury to use the $1 trillion at its disposal to start buying bad mortgages in hopes of turning the corner on the current crisis. The flurry of activity this morning speaks to the huge political consequences of the ongoing battle to rescue the economy. Nearly every American is now paying attention and worried about the impact of the failure of the bailout on their own lives. In polling released by the Washington Post and ABC News this morning, more than nine in ten voters said they were worried that the failure of the bill could cause even more serious economic problems down the line. And, despite the fact -- as we have noted before -- that neither Obama nor McCain can do really do much to change the financial direction of the country, there's little doubt judging from their words and actions this past week that each candidate believes that voters are looking to them for solutions. While the proposals this morning are a start, The Fix chatted with a number of Democratic and Republican strategists to solicit their ideas on what more (or less) Obama and McCain could do to "win" this issue with just 35 days left before the election. The best of their thoughts, and some of our own, are below. Agree or disagree? Have thoughts of your own? Offer them in the comments section below. MCCAIN • Go Negative: Many Republican strategists believe there is simply no way for McCain to win an economic-focused election by touting his own plans to turn things around. "Go totally negative and don't let up until election day," advised Ed Rogers, a longtime Republican strategist and lobbyist. "This election needs to be about Obama and what a liberal he is. Period." Another Republican operative added: "Start attacking Obama's character relentlessly (again) if the McCain campaign has any hope of regaining the initiative.... It's not like there isn't plenty out there." The Republican National Committee seems to be following that advice with a new ad from its independent expenditure wing that savages Obama on his proposal to spend $1 trillion more on new programs; "Obama's spending plan: It'll make the problems worse," reads white writing on a black screen at the ad's close. • Stay out of Washington: McCain's initial campaign suspension gambit is widely seen in Republican circles as a failure. Don't repeat it. The more McCain reminds voters that he is "of Washington" the worse this issue plays. Always remember that less than one in five Americans approve of the job Congress is doing and a similar number believe the country is on the right track. "I don't think he should return to Washington because that just reminds and re-chatters that he returned to Washington the first time and didn't get it done," said one GOP strategist. • Persuade Privately: McCain's very public role in the negotiations blew up in his face last week. So, take the opposite tact; go underground -- organize private meetings with GOP House leaders out of the public eye to convince them of what is at stake if no bill is passed. The blame game seems to be falling inordinately on Republicans -- particularly House Republicans -- at the moment and that is bad for the GOP up and down the ticket. (Fifty-four percent of Fixistas said House Republicans should bear the blunt of the blame in our decidedly unscientific poll last night.) "Stay out of the negotiating squabble," argued on Republican consultant. "Stay quiet publicly if rumors leak out of any overt 'involvement' in them." • Summit It: Take the lead in calling for a summit between himself, Obama and their top five economic advisers. Leave Congress out of it. Hope -- and do everything you can to ensure -- that a plan emerges from that high-level summit. If the two presidential candidates can get together on a plan, it's hard to imagine that Congress would balk at the proposal. Of course, after yesterday's vote, anything is possible. • Moveon.org: Under the belief that this issue cannot be won, stay in the background and hope that a solution is found sooner rather than later. McCain's attempt to be the "man in the arena" flopped last week and that should be a sign that this is an absolute no-win for the Arizona senator. "The bottom line politically is McCain needs this behind him as soon as possible," said Phil Musser, a Republican consultant and former executive director of the Republican Governors Association. "Every day we are in this limbo where top line messaging lies well beyond our control . . . is a bad news day for us." OBAMA • Do Nothing: The desire for change in Washington has been growing almost by the day since the financial crisis began nearly two weeks ago. To date, Obama has largely adopted a hands off approach, refusing to be baited by McCain's call to suspend his campaign last week and postpone the debate. And, it's worked. Public and private polling has shown an Obama rise/McCain drop in recent days -- as the average voter seems to be reacting more positively to Obama's sober approach to the crisis than McCain's more frenzied strategy. "Putting aside substance, the politics of this favor Obama so he doesn't have to do much, if he doesn't want to," said one Democratic consultant. • Summit It: The only suggestion that cropped up in our conversations with both Democrats and Republicans was the convening of a bipartisan summit led by Obama and McCain. "[Obama] should call McCain and the two of them should convene a private unity summit for Republicans and Democrats to come together to hash out an acceptable final product," said Phil Singer, a former senior official for Hillary Rodham Clinton's presidential campaign. "They should make it clear that in the interest of producing a bill, they will play no role in the process -- so as not to politicize things further." • Reintroduce the Stimulus Package: A bill aimed at providing the economy a shot in the arm passed the House last week but has been held up in the Senate. Obama, according to several Democratic sources, should re-introduce the bill and demand its passage as a necessary momentum-builder for an economy badly in need of some good news. "Obama should say we need to make sure that Main Street is a part of this effort and not passing the stimulus is a mistake," argued one Democratic strategist. "It makes McCain go on the defensive and [he] would have to come back and vote for it -- would be horrible if he voted against it."
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