Sandra Hines of the Moratorium Now! Coalition to Stop Foreclosures and Evictions speaks to the rally protesting the proposed trillion dollar bailout of Wall Street, Sept. 25, 2008. (Free Press Photo).
Originally uploaded by Pan-African News Wire File Photos
By Kathy Kiely and Sue Kirchhoff, USA TODAY
WASHINGTON — In a stunning rebuke to President Bush, congressional leaders and Wall Street, the House rejected a $700 billion financial bailout package Monday, with a coalition of conservative Republicans and liberal Democrats refusing to grant the government sweeping powers to buy up distressed loans.
The vote was 228-205 against the measure, with one member not voting. There was broad bipartisan opposition to the measure, with more than 90 Democrats and more than 130 Republicans voting against the bill. Republicans voted more than 2-1 to oppose the bill.
The vote came even though the measure was backed by Bush and House leaders in both parties. But opponents said the package granted the U.S. government too much power and and was beyond the cost the government should pay to address the worldwide financial crisis.
Wall Street reacted immediately to the news. The Dow Jones Industrial Average fell by more than 700 points at one point as the outcome became clear. After the vote, the Dow remained down by more than 550 points.
Lawmakers were prodded all day by President Bush and leaders from both parties before voting began in the early afternoon.
"We have an imperfect product, but we have a product that may work — a product that may work if we have the votes to pass it," said House Republican leader John Boehner of Ohio.
"This Congress has to do its job. None of us came here to have to vote for this mud sandwich...but let me tell you this: I believe Congress has to act."
"No one is happy that we have seen the failures that we have seen in our economic system," House Financial Services Committee Chairman Barney Frank, D-Mass., told the House. He argued that Main Street, not Wall Street, now would suffer if there was no action.
"Any purchase that requires credit of any size — people will get hurt," Frank said, arguing that inaction would make it difficult to impossible to finance the purchases of cars and homes.
The measure will "keep the crisis in our financial industry from spreading," across the economy, President Bush said Monday from the White House, as he pressed anew for its passage. "We'll make clear that the U.S. is serious about restoring confidence and stability in our financial system."
"There are no other choices — just this one choice," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. "This will be the most difficult decision I will make in my 16 years in this body, and I have decided that the cost of not acting outweighs the cost of acting."
As the House debate continued all morning Monday, opponents were skeptical that the bailout would staunch the financial bleeding.
"I feel that it is too much bailout and not enough workout," said Rep. Jeb Hensarling, R-Texas.
On the opposite end of the ideological spectrum, liberal Democrat Lloyd Doggett of Texas called the bill too generous to the nation's financial kingpins. "The vultures have no come home to roost," he said.
"It's like a big cowpie with a little bit of marshmallow inside and I don't want to eat the cowpie," said Rep. Louie Gohmert, R-Texas.
Other members of Congress were vexed by the decision they faced. Less than an hour before the vote was scheduled, Rep. Bill Pascrell, D-N.J., said he was still undecided and likely would make up his mind as he walked to the House floor.
"We're flipping coins here," he said. "What happens if this goes down today — the markets tank and you are an accessory to the crime? But what happens if you vote 'yes' and the market tanks anyway?"
He added, "Most of my constituents are against this, but when I prod them they don't really understand. It's a very complex issue. But I've got to make a decision here — otherwise I'm an automaton."
Wall Street reacted negatively as the debate was underway. The Dow Jones Industrial Average dropped more than 300 points when markets opened Monday and remained there at mid-day.
Backers of the measure continued to press their case in the hours before the vote. On Monday, Senate Banking Committee Chairman Chris Dodd, D-Conn., again said failing to act would make the situation much worse for all taxpayers. "This is not just about Wall Street," he said in a broadcast interview.
Sen. Judd Gregg, R-N.H., who represented fellow Republicans in the hard-fought 10 days of talks that culminated in a deal early Sunday morning, called it a "tourniquet" for the ailing financial industry and slow-moving economy.
Still, both men said the necessity of such massive government action is a sad day for the nation. Asked if the legislation would pass, Dodd said only: "We hope so."
Contributing: John Fritze and Fredreka Schouten in Washington; Douglas Stanglin and Randy Lilleston in McLean, Va.; Associated Press
House poised to reject $700B bailout
By Kathy Kiely and Sue Kirchhoff, USA TODAY
In a stunning rebuke to President Bush, congressional leaders and Wall Street, the House is poised to reject a $700 billion financial bailout package Monday, with a coalition of conservative Republicans and liberal Democrats refusing to grant the government sweeping powers to buy up distressed loans.
The vote was 207-226 against the measure, with one member not voting, half an hour after voting began. Voting remains open even though the "official" time has expired for casting a ballot.
There was broad bipartisan opposition to the measure, with 95 Democrats and 133 Republicans voting against the bill. Republicans voted more than 2-1 to oppose the bill.
The vote came even though the measure was backed by Bush and House leaders in both parties. But opponents said the package granted the U.S. government too much power and and was beyond the cost the government should pay to address the worldwide financial crisis.
Wall Street reacted immediately to the bad news. The Dow Jones Industrial Average fell by more than 700 points as the outcome became known, then settled near a 450-point loss.
Lawmakers were prodded all day by President Bush and leaders from both parties before voting began in the early afternoon.
"We have an imperfect product, but we have a product that may work — a product that may work if we have the votes to pass it," said House Republican leader John Boehner of Ohio.
"This Congress has to do its job. None of us came here to have to vote for this mud sandwich...but let me tell you this: I believe Congress has to act."
"No one is happy that we have seen the failures that we have seen in our economic system," House Financial Services Committee Chairman Barney Frank, D-Mass., told the House. He argued that Main Street, not Wall Street, now would suffer if there was no action.
"Any purchase that requires credit of any size — people will get hurt," Frank said, arguing that inaction would make it difficult to impossible to finance the purchases of cars and homes.
The measure will "keep the crisis in our financial industry from spreading," across the economy, President Bush said Monday from the White House, as he pressed anew for its passage. "We'll make clear that the U.S. is serious about restoring confidence and stability in our financial system."
"There are no other choices — just this one choice," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. "This will be the most difficult decision I will make in my 16 years in this body, and I have decided that the cost of not acting outweighs the cost of acting."
As the House debate continued all morning Monday, opponents were skeptical that the bailout would staunch the financial bleeding.
"I feel that it is too much bailout and not enough workout," said Rep. Jeb Hensarling, R-Texas.
On the opposite end of the ideological spectrum, liberal Democrat Lloyd Doggett of Texas called the bill too generous to the nation's financial kingpins. "The vultures have no come home to roost," he said.
"It's like a big cowpie with a little bit of marshmallow inside and I don't want to eat the cowpie," said Rep. Louie Gohmert, R-Texas.
Other members of Congress were vexed by the decision they faced. Less than an hour before the vote was scheduled, Rep. Bill Pascrell, D-N.J., said he was still undecided and likely would make up his mind as he walked to the House floor.
"We're flipping coins here," he said. "What happens if this goes down today — the markets tank and you are an accessory to the crime? But what happens if you vote 'yes' and the market tanks anyway?"
He added, "Most of my constituents are against this, but when I prod them they don't really understand. It's a very complex issue. But I've got to make a decision here — otherwise I'm an automaton."
Wall Street reacted negatively as the debate was underway. The Dow Jones Industrial Average dropped more than 300 points when markets opened Monday and remained there at mid-day.
Backers of the measure continued to press their case in the hours before the vote. On Monday, Senate Banking Committee Chairman Chris Dodd, D-Conn., again said failing to act would make the situation much worse for all taxpayers. "This is not just about Wall Street," he said in a broadcast interview.
Sen. Judd Gregg, R-N.H., who represented fellow Republicans in the hard-fought 10 days of talks that culminated in a deal early Sunday morning, called it a "tourniquet" for the ailing financial industry and slow-moving economy.
Still, both men said the necessity of such massive government action is a sad day for the nation. Asked if the legislation would pass, Dodd said only: "We hope so."
Contributing: John Fritze and Fredreka Schouten in Washington; Douglas Stanglin and Randy Lilleston in McLean, Va.; Associated Press
SEPTEMBER 29, 2008, 1:56 P.M. ET
Bailout Vote Uncertain
By MICHAEL R. CRITTENDEN
Wall Street Journal
WASHINGTON -- U.S. lawmakers took the final steps towards to the most dramatic federal intervention in the financial markets since the Great Depression on Monday, taking to the floor of the House of Representatives to give impassioned pleas for and against a $700 billion Wall Street rescue plan.
The bill appeared short of the necessary support, however, and the Dow Jones Industrial Average dropped more than 700 points as "no" votes mounted. The Dow later recovered part of those losses, trading down around 380 points to 10760. As of around 1:52 p.m., nays stood at 227 and yeas stood at 206.
After a weekend of tense negotiations, Congress settled on a tentative $700 bailout plan. WSJ's Washington Bureau Chief John Bussey looks at the deal and how markets are likely to react.
The House is scheduled to vote Monday afternoon on the legislation, which was finalized Sunday after exhaustive negotiations between lawmakers and the Bush administration over the past week. A Senate vote to pass the bill and send it to President George W. Bush for his signature is expected on Wednesday at the earliest.
"It will be an effective intervention to restore the confidence necessary to avoid the kind of panic we haven't seen in this country for decades," Rep. Adam Putnam of Florida, the chairman of the House Republican Conference, said during a floor speech.
House Financial Services Chairman Barney Frank (D., Mass.) said lawmakers need to act to avoid a "more dismal future" for the nation's economy. "The consequences will be severe" if we fail to act, said Rep. Frank, who was the key negotiator for the House on the legislation.
House Financial Services Committee Chairman Barney Frank, Senate Majority Leader Harry Reid, Speaker of the House Nancy Pelosi and Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd.
But it was clear that lawmakers from both sides of the aisle were skittish about voting on such a dramatic piece of legislation a little more than a month before the November elections. Polls have shown voters are wary of the plan to rescue financial firms by having the federal government buy up hundreds of billions of dollars of toxic assets, and many members described Monday's decision as a "legacy vote" similar to the decision to authorize the use of force in Iraq.
"Only a couple of a times in a decade are we asked to stand up and be counted. This is one of those historic moments," Rep. Paul Kanjorski (D., Pa.) said.
The Bailout Deal
Rep. Gary Miller, a Republican from California, called it "probably the hardest vote" many lawmakers would take. His colleague, Rep. Tom Davis (R., Va.), agreed, but said it was a necessary evil. "I wish there was a better way but I haven't seen it," Rep. Davis said. "If this bill goes down I don't think most of my colleagues want ownership of what follows."
Still, both Democrats and Republicans made clear they would oppose the legislation despite efforts of negotiators to satisfy a number of constituencies.
"Why isn't Wall Street paying for the mess they created?" Rep. Lynn Woolsey, (D., Calif.), asked during a floor speech.
Michigan Republican Thaddeus McCotter was more philosophical, making what he said was a reference to the Dostoevsky novel "The Brothers Karamazov" in expressing his opposition to the bill.
"These interests who want your money threaten your prosperity," Mr. McCotter said. "You are being asked to choose between bread and freedom and I suggest the American people have chosen freedom."
Write to Michael R. Crittenden at michael.crittenden@dowjones.com
Bailout Doubts Spook Stocks
By PETER A. MCKAY
Wall Street Journal
Bailout or no bailout, America's financial industry and its economy are ailing.
That glum realization permeated Monday's trading session, leaving major stock-market measures sharply lower despite progress in Washington toward passage of a $700 billion federal rescue of Wall Street. The Dow Jones Industrial Average was recently down more than 275 points, or 2.5%, at 10867.79, down nearly 5% since crisis erupted a few weeks ago on Wall Street following the meltdown of Lehman Brothers Holdings.
As Congress moved closer to approving a bailout package on Monday, traders grew hopeful that an economic calamity can be averted. However, many remain nervous that a U.S.-led global slowdown -- ugly and persistent but shy of an all-out disaster – is still underway.
Likewise, analysts said financial firms around the world are likely to continue to struggle awhile longer with soured credit bets – a point underscored as four European institutions sought rescue plans from their local governments and Wachovia became the latest struggling U.S. bank to sell itself off in order to survive.
"Bailouts only work when the economy is going in the right direction," said Bill King, chief market strategist at M. Ramsey King Securities in Burr Ridge, Ill. "That's not the case here, and the package they're talking about does nothing to address the underlying weakness in the economy," caused by high energy prices and other issues away from Wall Street.
The prospect of a bailout package for Wall Street has dominated trading for more than a week, with proponents of an intervention arguing that government action is necessary to keep banks willing and able to extend credit to an array of businesses in other sectors that drive economic growth.
Of course, whether those companies will feel confident enough about the demand outlook for their goods and services to want to expand their operations is a separate matter.
Concerns that many companies, at best, will remain on pause in the months ahead hampered stock indexes across the board on Monday.
The S&P 500 fell 4% to 1164.93. All of the broad measure's sectors traded lower, led by a nearly 8% slide in its financial category.
The small-stock Russell 2000 was down 3.7%, trading at 678.88. The technology-focused Nasdaq Composite Index fell 4.7% to 2081.00.
In the meantime, lawmakers debated a bailout plan hammered out over the weekend by the Bush administration and senior congressional leaders. The latest version calls for $250 billion upfront to be given to the U.S. Treasury to buy troubled assets, which then, subject to Congressional disapproval, could rise to as high as $700 billion.
Markets on the Move
Members of the House voted 220 to 198 Monday morning to move the bill forward. They approved ground rules for its consideration in the chamber, including three hours of general debate and a final vote, expected shortly.
Investors flocked to U.S. government debt looking for safety. The yield on the 3-month Treasury bill, considered the safest short-term investment, fell near 0.70% from 0.87% late Friday. The price of the benchmark 10-year note jumped 1-8/32, pushing the yield down to 3.701%, compared to 3.827% late Friday.
In another worrisome sign for the financial sector, Wachovia joined the growing list of U.S. financial giants that have either been seized by the government or sold off to stronger firms. The Federal Deposit Insurance Corp. announced early Monday that Citigroup will acquire Wachovia's banking operations. The deal was reached in concurrence with the Federal Reserve Board and the U.S. Treasury Department. Citigroup was nearly flat in the wake of the announcement.
Last week, Washington Mutual was seized by federal regulators in the largest as the bulk of the bank was acquired by J.P. Morgan Chase. WaMu's failure, the largest in U.S. banking history, followed the collapses of mortgage titans Fannie Mae and Freddie Mac, insurer American International Group and Wall Street's storied investment banking giants Lehman and Merrill Lynch.
Investor sentiment on Monday also suffered a blow from aggressive selling in European markets after four financial institutions there sought rescue plans. Three governments bailed out Fortis, the U.K. government nationalized mortgage lender Bradford & Bingley, Germany's Hypo Real Estate Holding was rescued by a consortium, and Iceland stepped in to save a local bank. All major European indexes were down more than 4%, with financial stocks leading declines.
The troubles in Europe sent the dollar rallying against the euro and the British pound. The U.S. Dollar Index, which measures the greenback's value against a basket of six overseas denominations, rose 0.7%.
Oil futures dropped slid almost $8, trading under $100 a barrel in New York as fears about slowing demand due to global economic weakness gripped the commodity markets. The broad Dow Jones-AIG Commodity Index slid more than 4%.
Analysts said the flurry of developments around the world is confirming fears that the global financial contagion is likely to spread further before any recovery. "There's an increasing realization that the cleanup and the mending of all that's gone wrong is going to take an extended period to work through, and we're going to see an extended recovery period," said Jamie Spiteri, senior dealer at Shaw Stockbroking in Sydney.
In addition, the troubles at Wachovia and Fortis signal the first time that major commercial banks are now facing forced sales or breakups since the onset of the credit crisis a little more than a year ago.
Morgan Stanley and Mitsubishi UFJ Financial Group have reached an agreement whereby Japan's biggest bank by market value will buy a 21% stake in the Wall Street firm.
Write to Peter A. McKay at peter.mckay@wsj.com.
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