The House Rejects $700 Billion Bailout: UPDATE: Arm Twisting Fails

So much for a tentative deal to spend up to $700 billion to bail out the financial industry. The text of the bill is here.

Wall Street isn't liking this situation at all, as the DJIA has dropped more than 600 points (then bouncing off that low to hit a 500 point loss). The Dow had been down roughly 300 points today, but the market tanked once news that the House rejected the bailout proposal on a 185-197 vote.

The preliminary vote was 185-197.

Even as the electronic roll call began, Democratic and Republican leaders were uncertain about having enough votes to pass the politically unpopular plan. It's the most sweeping government intervention in markets since the Great Depression.

The bailout puts in place an unprecedented federal program to buy up rotten assets from cash-starved firms. The goal is to free up choked credit that was threatening to cause broader market turmoil.

The breakout of who voted against the bill is interesting since many Democrats broke against this bill:

Democrats Yeas 140 Nays 94
Republicans Yeas 65 Nays 133

There's a reason that many people are suspicious of this bailout, and those Democrats who are busy complaining that the GOP brought about this crisis because of deregulation ought to be very careful about what they say because it was their own caucus that protected Fannie Mae and Freddie Mac from closer scrutiny and increased regulation at the hands of the Bush Administration:



Hot Air has the choice quotes.

I'm still amazed that Rep. Barney Frank is allowed anywhere near this bailout package given the way that he was an integral part to spreading the toxic paper from the outset. He, along with Sen. Chris Dodd remain the talking heads the Democrats send out to talk about this crisis despite their cozy relationship to the banking industry, sweetheart mortgage deals, and failure to oversee the very institutions that are now causing a market meltdown.

What makes the bailout package all the more odd is that the numbers associated with it have no bearing on what is actually required. The number was picked out of thin air to scare Congress into acting. Where's the support for the figure?

It's self supporting. If you, as Treasury Secretary Paulson did, claim that the markets are going to tank if this massive infusion isn't done, the markets will react as though this is true. So, it should not be surprising that the moment that the Congress rejects the bailout the markets tank. They, along with the other financial companies around the world were looking to see what Congress would do, and here's your answer.

Nothing.

This doesn't mean that Congress was correct to reject this measure or that Paulson was wrong. The problem is that no one has adequately defined the problem, the extent of the assets at risk, and how or why the financial companies should be bailed out of their bad decisions by companies or that the government and responsible taxpayers should be on the hook for the risks taken by others. Paulson scared the markets into believing that Congressional inaction would cause a major meltdown, and may have made the situation worse for it.

UPDATE:
Speaker Pelosi (D-CA) was doing her best to twist arms to get enough votes to make this bill pass. She failed to convince her caucus to vote for the bill, and there aren't enough Republicans to approve the measure at present. I can't imagine what she's trying to tell those on the fence here that will convince them to support this bill? President Bush, Vice President Cheney, and Treasury Secretary Paulson were also leaning on GOPers to get them to switch votes.

Their efforts failed.

And you can blame both parties for the failure. Democrats voted against this bill in sufficient numbers to take the blame, though you know that it will be Republicans who are blamed even though had this gone according to a party line vote, the bill would have passed.

UPDATE:
So, the New Jersey delegation voted against the bill 7-6.

Overall, the bill was defeated 228-205, with 140 Democrats and 65 Republicans supporting it. In New Jersey, the vote was 7-6 against, with four Democrats and two Republicans supporting it.

Rep. Steve Rothman (D-Fair Lawn) parroted the line that the bill was nothing more than a bailout for the financial companies with no assistance for homeowners. I'm sorry, but what exactly was that massive bailout package that Congress passed and the President last December that rewarded sub prime mortgagees? That was the bailout for homeowners.

This was a different package for a different purpose, and yet some Democrats thought it was insufficient to allocate up to $700 billion for keeping the financial system going (the same financial system that provides those loans in the first place). They wanted still more misbegotten programs to assist in creating still more subprime mortgagees who are likely incapable of repaying the loans, further expanding the amount of bad paper that has to be bailed out at some later date.

Opposing the bill were: Rep. Steve Rothman (D-Fair Lawn), Scott Garrett (R-Wantage), Rodney Frelinghuysen (R-Harding), Frank LoBiondo (R-Millville), Chris Smith (R-Robbinsville), Bill Pascrell Jr. (D-Paterson), and Donald Payne (D-Newark).

Supporting the bill were Democratic Reps. Albio Sires of West New York, Frank Pallone of Long Branch, Rob Andrews of Haddon Heights and Rush Holt of Hopewell Township; and Republican Reps. Michael Ferguson of Westfield and Jim Saxton of Mount Holly.