Following financial turmoil on Wall Street over the past several weeks, the House of Representatives on Monday voted 228 to 205 to reject a $700 billion bailout for failing financial institutions. However, the issue is still very much alive in Washington and on Wall Street. In casting their votes, members of Congress faced pressure both from their constituents-many of whom objected to using taxpayer dollars for the phased aid package-and from President George W. Bush, Treasury Secretary Henry Paulson, and Federal Reserve Chair Ben Bernanke-pushing quick action on the plan.
Known as 2008’s Black Monday, the stock market response to the failure of what has been called a bailout by some and a rescue by others was initially severe. Falling 777 points in one day, the Dow Jones Industrial Average leapt by another 485 points the very next day, following a recent roller-coaster trend of volatility that has resulted in a grim stricture on the nation’s credit market. Many businesses, reliant upon lines of credit to finance day-to-day operations, have felt the crunch as banks raised the interest rates on short-term loans to an all-time high. Similar financial woes have been experienced in markets around the world, with governments coming to the aid of financial giants this week in Germany, England, and other European nations, resulting in a sharp decline in bank shares.
Many Congressional Republicans stated ideological opposition to the expansion of government control over the economy, which they said was evinced by the proposed legislation, while their Democratic counterparts objected to the burden it placed upon taxpayers. Even the bill’s supporters were wary of it, giving the impression that it was a necessary but unwanted evil. In light of public outcry, many members of the House voted in line with the wishes of their constituency. Most of the Senate will not be affected by the coming election, so discussion in the Senate has been generally more supportive of the bill.
Congressmember Lois Capps, who is up for reelection in California’s 23rd Congressional District, said, “I can understand why people are angry. I’m angry, too. But what happens on Wall Street is tied very closely to what happens on Main Street.” Capps said that while she didn’t want to vote for the bill, she felt it was necessary to prevent economic calamity. “If the [Treasury] secretary is correct, lending would come to a near halt. That means it would be much, much more difficult-and expensive-to obtain loans to buy a car, a home, or to run a business. Small, medium, and large businesses alike would begin layoffs because the ability to obtain a loan is such a critical part of running a business today, much less growing a business.” Capps said a number of points were written into the law to provide oversight, including a standing committee composed of members of the House and Senate to review every action undertaken by the Treasury secretary with regard to the government-run financial institutions.
Matt Kokkonen, the Republican candidate vying for Capps’s seat in the upcoming election, called Paulson “the fox watching the henhouse” with regard to his potential rise to leadership over some of the same Wall Street companies he worked among as an executive at Goldman Sachs. Kokkonen criticized the notion of adding nearly a trillion dollars to a national debt that now stands close to $10 trillion. “I believe in the long-term viability of the markets,” he said, echoing many Republicans who have supported the notion of a self-correcting economy. “It’s a very complicated issue, so there’s no simple solution to it.”
In his assessment of the financial crisis, Republican 24th Congressional District Representative Elton Gallegly faulted mortgage lenders who approved loans for people who couldn’t afford them, and felt that not enough oversight was offered by the bill as written. “I could not vote for the largest corporate bailout bill in American history without greater assurances that it would restore confidence in our financial system and address the long-term problems that caused this crisis. Therefore, I voted ‘no.’”
Capps and others remain hopeful that further discussion of the bill in the House-which resumed after Rosh Hashanah-will lead to action that will prevent a recession. The Senate introduced revised legislation on Wednesday morning in response to a reported shift in the nature of angry calls received by members of Congress-people who lost money on stocks are calling for immediate corrective action. The Senate is expected to vote on the bill Thursday evening, but did not leave it open for many changes by the House, which has already begun adding tweaks of its own.