$700 billion bailout rejected
September 29, 2008
Washington’s massive bailout of Wall Street has been rejected by members of Congress amid dramatic scenes, after strong objections by the public to the $700 billion rescue plan.
The White House and Congressional leaders, who reached a compromised agreement on the financial package on Sunday, were confident that the measure would pass.
But rank and file members of both the Republican and Democratic parties rebelled, after many received complaints from their constituents throughout the morning about the deal to use taxpayers’ funds to buy devalued assets of major Wall Street firms.
All 435 members of the lower House of Representatives face re-election on Nov 4.
A total of 132 out of 199 Republicans voted against their whips and against their president despite a morning appearance by George W Bush urging them to approve the bill for the good of the nation.
With just a simple majority needed to pass the bill, 94 Democrats joined the rebellion, defeating the bill by 228 to 205. Party whips attempted to twist arms, to no avail. The bill will now have to be reintroduced at a later date.
The bill was defeated by an unlikely alliance of conservative Republicans who viewed the bill as “socialism” and left-wing Democrats who resented the fact that the bill did not contain more provisions to help struggling homeowners.
The Dow Jones industrials dropped suddenly as news of the rejection hit Wall Street. The Dow had already dropped by about 300 points, and then fell a further 300 points in a matter of minutes, before recovering slightly.
House Republicans blamed Democrat Speaker of the House Nancy Pelosi for a partisan speech on the floor shortly before the vote was taken that inflamed feelings and led to members turning against the bill.
John Boehner, leader of the House Republicans, said: “I believe we could have got there today had it not been for a partisan speech that the Speaker gave. The Speaker had to give a partisan voice that poisoned our conference and that caused a number of our members to go south.”
Mr Boehner and other senior party figures said they would work to reform the bill and find a “true middle ground”.
A White House spokesman said Mr Bush was “very disappointed”.
“There’s no question that the country is facing a difficult crisis that needs to be addressed,” deputy press secretary Tony Fratto said.
He said the president will be meeting members of his team later in the day “to determine next steps”.
At 7.30am, Mr Bush had praised the bill as “strong and decisive legislation” that “will help restart the flow of credit” but Wall Street was fearful that the government’s plan to buy bad debt wouldn’t be sufficient to resuscitate nearly frozen credit markets.
US investors were also unnerved by the buyout of the country’s sixth largest bank Wachovia by Citigroup. By mid-morning the Dow Jones industrial average fell by 2.45 per cent.
The president urged Congress to pass the bill expeditiously and asked voters to remember that a “vote for the bill is a vote to prevent damage to you and your community”.
Congressional leaders had won key concessions from the White House and Treasury Secretary Henry Paulson, most notably a cap on compensation for bosses at bailed-out firms, a guarantee that the government will be paid back first when troubled assets begin earning again, and the phased introduction, with heavy Congressional oversight, of rescue funds.
Public attitudes to the bailout are at best grudging acceptance and at worst hostility.
Both presidential candidates, Senators Barack Obama and John McCain, had expressed their support for the deal.
Source: The Telegraph
Written by: Alex Spillius in Washington