On September 29, 2008, the U.S. House of Representatives rejected, by a vote of 228-205, the 700 billion dollar bailout plan proposed Secretary Treasurer Paulson ("House Kills"). The Dow Jones industrial average plunged 777 points, its biggest ever single-day drop, or nearly 7 percent, to 10,365.45, its lowest close in nearly three years (Bush: “This”). The S&P 500 dropped 106.62 points and the Nasdaq fell 199.61 points (“House Kills”). In some attempt to fix the issue, President Bush again called for congressional approval of a bank rescue plan. But according to NBC Nightly News, “Congress has left town for the Jewish holiday. There is no plan.” (Washington News)."This is a huge cow patty with a piece of marshmellow stuck in the middle of it," Georgia Republican House Representative Paul Broun said. Several democrats also agreed. (“Bailout Proposal Denied”).
The federal government had claimed that the bill would be crucial to the stability of the American economy. The possibility for great failure is there, but the politicians will have to decide whether voters want the bill to go through (Connolly). The bill, which would have used its mass of funds to buy out toxic mortgage-related assets, would have started out with $250 billion, with $100 billion more to be released by the president with the approval of Congress, to the max of $700 billion (“US Congress Debates Massive Wall Street Bailout”). President George Bush urged the nation in an address that , “if our nation continues on this course, the economic damage will be painful and lasting” (Bush: "Painful"). Treasury spokeswoman Michel Davis announced shortly after that Secretary Henry Paulson would consult with President Bush, Federal Reserve Chairman Ben Bernanke, and congressional leaders on a subsequent course of action in response to this dilemma. (“House Rejects $700 Billion…”)
Market failures were not confined to U.S. markets. The drop affected stock markets worldwide with drops in Asian markets, such as the Japanese Nikkei, which lost 483 points (4%). Australia and Taiwan’s stocks dropped as well, 4.3% and 3.6% respectively. The far east was not the only area affected, European nations also witnessed drops. As of Tuesday September 30, 2008 some increases are being seen in the DOW and other American markets, but at a slow and small rate. Peter Cardillo asserts that, “Major declines like yesterday (September 29, 2008) don’t generally end up reversing the next day.” There is some hope, however, Thursday (October 2, 2008) may be a new day for the Bailout Bill as Congress are talking about bringing it back (Isidore) Contrary to the popular understanding of events, stocks actually nosedived before the 228-205 rejection of the bill was announced on the House floor. (“Stocks Nosedive”)
Circumstances leading up to the vote was not auspicious. On Monday, Speaker of the House Nancy Pelosi spoke against the proposal and pointed fingers at the President’s “failed … economic policies” (Bailout plan rejected). Some Representatives voted simply they were weary of the haste. "Like the Iraq war and Patriot Act, this bill is fueled by fear and haste," said Lloyd Doggett, D-Texas. (Bailout Plan Rejected). While the bailout bill is being called ‘defeated,’ it is important to note that there were ample “No Votes” from both Democratic and Republican members of Congress. Only one member of the House abstained from voting. (Official Roll Call). One explanation of this is that, with an election only weeks away, supporting such an unpopular and controversial bill was not seen as a positive political move for members of the House of Representatives. (“Stocks Nosedive”)
Sources
Connolly, Kevin. “Why did the bail-out bill fail?” BBC News
news.bbc.co.uk/2/hi/business/7643199.stm
“Stocks Nosedive” By News Agencies
http://www.haaretz.com/hasen/spages/1025472.html
PBS News, “House Rejects $700 Billion Bailout; Stocks Plummet”
http://www.pbs.org/newshour/updates/business/july-dec08/bailout_09-29.html
Official Roll Call
http://clerk.house.gov/evs/2008/roll674.xml#NV
“Bush: This Is Not The End”
http://www.foxnews.com/story/0,2933,430462,00.html
House Kills Financial Bailout Bill, Global Markets Tailspin
http://www.usnews.com/usnews/politics/bulletin/bulletin_080930.htm
Bailout Proposal Denied By House…
http://www.msnbc.msn.com/id/26948919/
"Bush: Painful and lasting economic damage"
http://www.msnbc.msn.com/id/26953481/
House Kills Financial Bailout Bill, Global Markets Tailspin
http://www.usnews.com/usnews/politics/bulletin/bulletin_080930.htm
Comments (17)
Kelsey Heim said
at 10:13 am on Sep 30, 2008
President Bush said that the economic damage will be "painful and lasting" if Congress fails to pass $700 billion bailout bill (MSNBC news service)
http://www.msnbc.msn.com/id/26953481/#storyContinued
Alek said
at 10:26 am on Sep 30, 2008
Treasury spokeswoman Michel Davis announced shortly after that Secretary Henry Paulson would consult with President Bush, Federal Reserve Chairman Ben Bernanke, and congressional leaders on a subsequent course of action in response to this dilemma. (“House Rejects $700 Billion…”)
PBS News, “House Rejects $700 Billion Bailout; Stocks Plummet”
http://www.pbs.org/newshour/updates/business/july-dec08/bailout_09-29.html
Neha said
at 10:28 am on Sep 30, 2008
The bill was based on Treasury Secretary Henry Paulson's initial plan to buy up bad mortgage debt from banks as a way to get them to lend to one another once again. The Congressional lawmakers added provisions to this bill to protect taxpayers and enable them to benefit if the companies do too. The bill was shot down primarily because lawmakers voted along party lines- Democrats were for it, and the Republicans were against it. (Stocks Crushed)
Twin, Alexandra. "Stocks Crushed."
http://money.cnn.com/2008/09/29/markets/markets_newyork/index.htm
Kelsey Heim said
at 10:29 am on Sep 30, 2008
The rescue package that was rejected was worked out in marathon weekend talks among White House officials and Republican and Democratic negotiators. It would have allowed the government to buy up bad debt from troubled Wall Street firms and banks.
(Reuters)
http://www.reuters.com/article/topNews/idUSTRE48T2TA20080930
Carolyn said
at 10:29 am on Sep 30, 2008
Bush and his advisors claim that the plan was "vital to insulating ordinary Americans from the effects of Wall Street's bad bets." (House to meet)
House to meet Thursday after rejecting bailout, AP
http://www.msnbc.msn.com/id/26884523/#storyContinued
Jessamine Elliott said
at 10:30 am on Sep 30, 2008
The Emergency Economic Stabilization Act failed in the House of Representatives by a vote of 228 to 205. This caused the largest intraday drop in the stock market’s history, by more than 700 points. The price of oil slipped by $10, going to $97 per barrel. In a USA Today/Gallup Poll, only 22% of those polled favored the plan, which was set forth by Hank Paulson, the treasury secretary. 56% wanted something different, while 11% wished no action to be taken at all. The legislation comes after Paulson and Ben Bernanke, the chairman of the Federal Reserve, proposed that something must done at the September 18th Congressional hearing. (“A shock from the House”)
“A shock from the House”
http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12326538&source=features_box_main
Jaime said
at 10:31 am on Sep 30, 2008
“The White House had negotiated [the bill] with Congressional leaders of both parties . . . In the end, only 65 Republicans — just one-third of those voting — backed the plan despite personal pleas from President Bush and encouragement from their presidential nominee, Senator John McCain. By contrast, 140 Democrats, or 60 percent, voted in favor, many after voicing grave misgivings” (Hulse).
Hulse, Carl. “Bush Urges Congress to Pass Bailout.” http://www.nytimes.com/2008/10/01/business/01bailout.html
Travis said
at 10:31 am on Sep 30, 2008
Nancy Pelosi is likely to introduce another version of the bill later this week that will garner more democratic support by stripping elements of added by Republicans and adding others that will appeal to liberals (Washington News).
<;http://www.usnews.com/usnews/politics/bulletin/bulletin_080930.htm>
There were 140 Democrats that voted for the bill, compared to 65 Republicans. The ratios for those numbers are: three out of five Democrats who were pro bailout compared to one out of three Republicans (“Where Votes Went”). This would indicate that Pelosi’s strategy of making the bill more liberal friendly would be less productive than making the bill more conservative friendly.
<;http://news.bbc.co.uk/2/hi/business/7644259.stm>
(account deleted) said
at 10:33 am on Sep 30, 2008
<img src=";http://graphics8.nytimes.com/images/2008/09/30/us/30bush2-600.jpg">
Bush Urges Congress to Pass Bailout
http://graphics8.nytimes.com/images/2008/09/30/us/30bush2-600.jpg
(ok sorry, I just think it needs a picture!)
Allison Burnitt said
at 10:34 am on Sep 30, 2008
In the United States, the markets began to plummet even before the 15-minute voting period expired on the House floor(HULSE).
Bush Urges Congress to Pass Bailout
http://www.nytimes.com/2008/10/01/business/01bailout.html?ref=business
Kelsey Heim said
at 10:34 am on Sep 30, 2008
Henry Paulson said removing illiquid assets from markets through the proposed bailout will cost taxpayers less in the long run than having credit markets fail to work. He said Congress should "avoid slowing it down with other provisions that are unrelated or don't have broad support." (Glenn Somerville)
http://www.reuters.com/article/topNews/idUSTRE48M6FD20080923?feedType=RSS&feedName=topNews
Jaime said
at 10:35 am on Sep 30, 2008
"One of the fashionable ideas of the week, supported by both Democratic leaders in Congress and John McCain, is to limit the pay of top executives at any Wall Street firm that sells assets to the government."
Leonhardt, David. "Issue is Payback, Not Bailout." http://www.nytimes.com/2008/09/24/business/24leonhardt.html.
Tyla Kellel said
at 10:35 am on Sep 30, 2008
1) The same line from "house kills" is sited in both the first and third paragraph.
2) On a percentage basis, though, the Dow drop was 22% slide on Black Monday in 1987. (“What got killed”) http://money.cnn.com/2008/09/29/news/economy/financial_rescue_101/index.htm?cnn=yes (perhaps after Bush: "this" in the third paragraph)
Peter said
at 10:35 am on Sep 30, 2008
While Republican leaders blamed the bill’s defeat on Speaker Nancy Peloci’s speech, Peloci however quickly accused these economic issues on the “failed Bush economic policies” (“Bailout plan rejected - supporters scramble”).
http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?postversion=2008092914
Chelsea Lowden said
at 10:37 am on Sep 30, 2008
Isidore, Chris. “Stocks jump at open”
http://money.cnn.com/2008/09/30/markets/stockswatch/index.htm?cnn=yes
Carolyn said
at 10:38 am on Sep 30, 2008
Republicans have blamed Pelosi's speech on the House floor in which she blames the Bush administration and free-market for the current crisis, looking forward to the presence of a new President. (Lochhead)
House votes to reject bailout, Carolyn Lochhead
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/30/MN4S1387BO.DTL
Duncan Guignet said
at 10:39 am on Sep 30, 2008
"We haven't convinced people that this is a rescue effort not just for Wall Street, but for Main Street America," John McCain said from his campaign trail. (Bailout had bad PR)
CNN - McCain: Bailout had bad PR
http://money.cnn.com/2008/09/30/news/economy/McCain_plan/index.htm
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