National stories provided by CNN, CNBC, the Wall Street Journal, and CBS News. Click HERE for the result of a Google news search of the phrase "House rejects $700 billion bailout".
Click HERE to view the results of the roll call vote. By party, favoring the bill were 140 Democrats and 65 Republicans. Opposed were 95 Democrats and 133 Republicans.
Two members of Utah's three-member House delegation voted against it. District 1 Republican Congressman Rob Bishop explained, "It still lacks a great deal. It still appropriates $700 billion or puts it at risk. It doesn't make the insurance mandatory". Rep. Bishop also said lawmakers did not give themselves time to explore other options that don't take a lot of money and create capital. Bishop was skeptical of the proposed bill in the first place, so his "No" vote is no surprise.
Likewise, District 2 Democratic Congressman Jim Matheson voted against the bill. Matheson explained, "There is too much uncertainty about whether this bill will steady the financial ship. There is no tangible effort at reform of our financial system to prevent Wall Street from running the boat onto the rocks in the future", according to a press release. Rep. Matheson also doesn't agree with government being in the business of bailing out private companies that make bad business decisions. Matheson also was originally skeptical about the bill, so his "No" vote was anticipated.
Outgoing District 3 Republican Congressman Chris Cannon, who was believed to have intended to vote against the bill, changed his mind immediately before the vote. He told USA Today that he wasn't happy about it because it's fundamentally wrong, but he felt that it needed to be done.
A scathing anti-Bush speech delivered on the House floor by Nancy Pelosi just before the vote may have been enough to kill the bill. Several Republicans joined the ranks of the bill's opponents thereafter.
All three Utah Congressmen reported being deluged with phone calls and e-mails from angry Utahns demanding the bill be turned down. Other Congress members nationwide reported similar opposition from their constituents. Many considered it a form of corporate welfare. Contrary to earlier reports, the House now says there will not be another vote on the bill today. Typical Utah reaction reported in this KTVX Channel 4 video embedded below:
The Salt Lake Tribune separately reports that, in response to the "No" vote, the Dow fell 777.68, or 6.98 percent, to 10,365.45. This decline also surpasses the 721.56-point intraday decline record also set during the first trading day after the terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression. Other stock indicators also tumbled. The damage wasn't just restricted to the U.S.; Reuters reports that the Toronto Stock Exchange dropped 840 points.
The proposed bill would have allowed the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan worked, the thinking went, it would help lift a major weight off the national economy that is already sputtering. Click HERE to view the proposed 110-page bill in PDF format.
CNN Money provided a quick breakdown of some of the bill's key provisions; here's an abridged account:
- Doling the money out: The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury's use. Authority to use the money would expire on Dec. 31, 2009, unless Congress certifies a one-year extension.
- Protecting taxpayers: The ultimate cost to the taxpayer is not expected to be near the amount the Treasury invests in the program. That's because the government would buy assets that have underlying value.
- Stemming foreclosures: The bill calls for the government, as an owner of a large number of mortgage securities, to exert influence on loan servicers to modify more troubled loans.
- Limiting executive pay: Curbs would be placed on the compensation of executives at companies that sell mortgage assets to the Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000. No new "golden parachutes" would be allowed for their top 5 executives if they are fired or the company goes belly up.
- Overseeing the program: The bill would establish two oversight boards. First, there would be a Financial Stability Oversight Board which would be charged with ensuring the policies implemented protect taxpayers and are in the economic interests of the United States. Second, there would be a congressional oversight panel which would be charged with reviewing the state of financial markets, the regulatory system and the Treasury's use of its authority under the rescue plan.
- Insuring against losses: Treasury must establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 14, 2008.
Analysis: The American people aren't buying the need for this bailout. They've heard too many stories about CEOs getting mega-compensation packages while workers are asked to sacrifice. One of the most outrageous recent stories is the account of Washington Mutual CEO Alan Fishman, who stands to get $19 million for three weeks work, albeit with conditions. His predecessor, Kerry Killinger, is actually responsible for WaMu's demise, but $19 million for three weeks work is insane. Too many similar stories have turned Main Street against Wall Street.
However, too many Americans also believe the bailout is a scheme to create yet another investment bubble. Only the rich and entrpreneurial acrobats tend to profit from these bubbles; ordinary Americans who invest may temporarily profit, but their profits can be curtailed or even wiped out by sudden deflation of the bubble. This destroys ordinary Americans' faith in the so-called "market".
So most of us, speaking vicariously through the U.S. House of Representatives, are inclined to call the Bush Administration's bluff on this one. It's time for us to show that, for once, we're not going to buy any more of "the sky is falling" routine from the Administration. Hats off to the U.S. House for delivering the message.