A second chance for the bailout bill

What happened

In a dramatic rebellion that reverberated through world markets, the House this week defeated a mammoth, $700 billion bill that would authorize the Treasury to buy up toxic assets paralyzing the financial system. Two-thirds of House Republicans and 40 percent of Democrats defied party leaders to vote against the measure, leaving it 12 votes short of passage. Administration officials and leaders of both parties raced to revise the package to win over wavering legislators and stave off global financial catastrophe. Following the bill’s defeat, the Dow Jones Industrial Average suffered its largest-ever one-day point drop, falling almost 778 points on Monday. Credit markets froze up as banks and other institutions refused to make loans. “The legislation may have failed,” said House Speaker Nancy Pelosi. “The crisis is still with us.”

Some Republicans accused Pelosi of poisoning the atmosphere with a sharply partisan speech just before the House vote, while Democrats lambasted Republican conservatives for putting free-market ideology ahead of the national interest. But for many lawmakers facing contested elections in November, the deciding factor was public anger over using taxpayer money to rescue Wall Street. “We’re all worried about losing our jobs,” said Wisconsin Republican Paul Ryan, who voted for the bill.

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As The Week went to press, the Senate was planning to vote on an amended bill that adds two sweeteners sought by Republicans: new business tax breaks and a hike in the ceiling on federally insured bank deposits to $250,000. Senate leaders were confident the sweetened measure would pass the chamber, and House Republican chief John Boehner said it would win House approval by week’s end.

What the editorials said

Now we know why Congress has an 18 percent approval rating, said The Wall Street Journal. Democrats run the House, and the partisan Pelosi failed to assemble a majority vote. Republicans, meanwhile, turned their back on “the national interest” to have their little tantrum. Treasury Secretary Henry Paulson also deserves blame, for his haughty condescension toward the bill’s critics.

Here’s a question for the morons in Washington playing the blame game, said the Chicago Tribune. “Do you folks honestly think we pay you to behave this way?” The stock market’s plunge “is a warning that, no matter how vengeful any of us feels toward Wall Street, those of us who would suffer most from a seriously tanking economy live right here in Anytown, USA.” If confidence in banks and stocks is destroyed, and businesses and consumers can’t get loans, all of our jobs and savings will be at risk.

What the columnists said

“What an invigorating moment for democracy,” said William Greider in The Nation. Ordinary Americans have long seethed at Washington’s indifference to their plight, and their rage boiled over when they were presented with “a massive bailout of imploding Wall Street, financed with the public’s money.” This historic repudiation should be a wake-up call for an increasingly out-of-touch Washington elite.

Now is no time for populists to be teaching Wall Street a lesson, said Steven Pearlstein in The Washington Post. Nor is it time for conservatives to be clinging to free-market dogma. If nothing is done, credit markets will freeze and banks will continue to collapse, and the nation will face “a decade of little or no economic growth.” The only palatable alternative is “to have governments borrow gobs of money and effectively nationalize large swaths of the financial system so it can be restructured, recapitalized, reformed, and returned to private ownership once the crisis has passed.”

Fine, but don’t ask me to like it, said Jonah Goldberg in the Los Angeles Times. Boehner was speaking the truth when he called this wretched bill a “crap sandwich” that he had to eat nonetheless. Sorry, my fellow taxpayers, but from here on in, it’s “crap sandwiches as far as the eye can see.”

What next?

Passage of a revised bill should calm the markets, said Justin Lahart and Kelly Evans in The Wall Street Journal. “But it is unlikely to prevent” a recession. House prices are still falling, unemployment is rising, and businesses and households alike are cutting their spending. At best, the bill will act as a “defibrillator,” jump-starting stalled markets and preventing a bad recession from getting worse.