Sept. 18, 2008: Paulson meets with members of Congress to discuss TARP
Tell us about the evening Hank Paulson briefed you and others in Congress on the crisis.
I hadn’t heard from Paulson in a couple of weeks, and in that time we’d had Lehman, Merrill, and AIG. So I called and asked him to come the next day to meet not just with me but with our House Democratic leadership. When he called back he said, “Madam Speaker, tomorrow morning will be too late.” That evening he described the scenario from hell, a meltdown of such seriousness that Chairman Bernanke said, “If we don’t act immediately we will not have an economy by Monday.”
“He described the scenario from hell”
Now fast-forward to Sept. 29, when the House voted down the first version of TARP.
Quite frankly, that morning I had concerns about bringing up a bill that the votes weren’t there for. My impression from President Bush was, “You just bring it up, and they’ll vote for it.” I’m saying to Barney Frank, “I don’t know. I see a lot of people jumping ship over there.” But he said, “Oh, you can’t not bring it up. If you don’t bring it up, that’s an even worse message to the markets.”
The Dow fell 700 points that day. Were you aware of how the markets were reacting?
There wasn’t a TV on the floor of the House, but in the cloakroom you could see what was happening. You could see the votes racking up and then the market go down.
Who was your primary counterpoint?
I dealt completely with the White House on this. They were representing that they had the 100 votes. They got 65. That was really a disappointment. Maybe if they came up with 90, then we could have compensated for that. But 65 was just rejection. You have to give the Republican members credit, though. They don’t believe in a public role—the same attitude that got us where we were that day, of lack of interest in supervision, regulation, discipline, a cop on the beat. So it was totally consistent with the Republicans in Congress to say, “We didn’t believe in any intervention before. Why would we believe in an intervention now?”
Republicans chided you for making it a partisan issue because of a speech you gave that morning blaming President Bush’s economic policies.
I had to rev up my troops. If you look at the statements of the [GOP] members, they said, “Don’t insult us. This isn’t about her speech. It’s about what we believe in.”
A modified version of the package passed a few days later. What changed?
They never got their 100. At the end, they had 91, and the total vote was 263. That’s still not half of the Republicans voting for it. It was something necessary for our country, but it never was fully understood by their constituents: They saw this as a bailout for Wall Street rather than a rescue of our economy.