As Financial Bailout Advances, Jitters in the House

Posted by: Theo Francis on October 02

by Theo Francis and Jane Sasseen

It’s Thursday night and all eyes are on what may prove to be the most-watched vice-presidential debate in history. Friday, however, they will surely turn again to the House of Representatives as it holds a do-over of its dramatic vote Monday.

Will the House, this time, deliver the financial-system bailout that the administration and business groups are demanding, and which the Senate passed Wednesday night?

Probably. But that’s a far cry from the near certainty that preceded the Senate vote. And after Monday’s sudden about-face, it hardly inspires confidence. To be sure, new polling figures suggest public opposition to the financial rescue bill isn’t as strong as it seemed Monday; several dissenting lawmakers have publicly said they’ll vote yes; lobbyists are pulling out all the stops; and word is that House leaders won’t bring the bill to a vote at all unless they are sure — really, absolutely sure — that it will pass; Democrats were set to caucus at 6:30 p.m. Thursday. Meantime, rumors raced that the Oracle of Omaha, Warren Buffet himself, has been calling lawmakers to urge passage. (Buffett’s office declined to comment.)His $8 billion investments in General Electric and Goldman Sachs could run into big trouble if the package doesn’t go forward.

So maybe everyone’s just being careful to avoid falling flat on their faces again. And yet — there are a few troubling signs. “I don’t think they have the votes yet,” Dan Clifton, a Washington analyst for Strategas Research Partners, said Thursday afternoon.

A good part of the potential for problems lies in the very changes that the Senate made to win over the Republicans who balked on Monday. The bill, which started life as a three-page proposal from Treasury Secretary Henry Paulson, has swollen to more than 400 pages, fattened most recently with tax breaks and an increase in federal deposit insurance limits, as well as the mental-health parity bill that is being used as the procedural vehicle to carry the whole shebang from Senate to House.

A slew of tax-breaks added in the Senate -- many of them extensions of existing business breaks or intended to foster green-energy initiatives -- have boosted support from non-financial companies, who now have an incentive to lobby for the bill.

The tax package included many popular provisions aiding not only businesses but upper-income households -- it would continue a fix to prevent millions of taxpayers from being subject to the dread Alternative Minimum Tax, for example. Yet not all of those provisions are paid for by spending cuts or new revenue -- something fiscal conservatives, including not only many Republicans, but also the so-called Blue Dog Democrats, detest.

At the same time, the various concessions to business and the right has many on the left, including union and consumer groups, hopping mad. "They've Christmas-treed this up for business," one lobbyist said before the Senate vote. They have been pushing for the House to add various measures to aid families, homeowners and municipalities in return, such as extending unemployment benefits, reviving a previously discarded provision to allow judges to modify mortgages in bankruptcy, or offering assistance to state and local governments. They hint that additional Democrats might bolt if these measures aren't taken.

House leaders have been scrambling to head off problems -- and resisting calls to add anything more to the bill for fear of bogging it down. A senior Democratic staffer says the Blue Dog Democrats are expected to support the measure on the grounds that their fiscal principles favor aiding the broader economy. And he says House leaders are likely to offer an extension of unemployment insurance with a separate bill -- that avoids another vote in the Senate to approve any changes to the financial-crisis measure; there's been no deal with Republicans to pass an unemployment measure, he adds.

A handful of public vote-switchers suggest the House leadership is having some success. Representatives Ileana Ros-Lehtinen (R-Fla.), Zach Wamp (R-Tenn.) and Emanuel Cleaver (D-Mo.) are among those reported by the Associated Press to be for the bill after being against it. They cited the tax-break additions and changes in public sentiment for their changes of heart.

"I hate to say it, but the Dow being down 300 [points] helps the vote count," says one well-connected Republican lobbyist from the manufacturing sector.

Moreover, with the election approaching, many incumbents in the House -- all of whom are up for re-election -- have another incentive. "Members want to get this issue over with," Ted Bornstein, a partner at Foley & Lardner, said in a telephone briefing Thursday morning. "It’s been hanging out there for two weeks, it’s been taking away from campaigning back home. I think they just want to get out of town."

Reader Comments

Richard

October 2, 2008 07:56 PM

As an American living and working in Japan, it is so embarassing. I really wish all my fellow Americans could consider how we are now perceived
in other countries
The USA is supposed to be the ultimate symbol of freedom and democracy..but look where we are now !? Bush and his Republican idiots are always preaching countries like China to respect human rights Well..were were our human rights and freedom for us when these greedy, incompetent Wall Street CEOs plunged us into this mess. So damm outrageous and unacceptable that the Republicans insisted on incl. major corp. tax breaks before the bailout vote. We were all deceived and betrayed by the Republicans who forced us taxpayers to pay taxpayer dollars to fund a war in Iraq that was not only unjust unnecessary..there was no reason for it. THERE WERE SIMPLY NO WEAPONS OF MASS DESTRUCTION !!
McCain would continue the arrogant cowboy policies of Bush. We really seriously need to fix this awful image of the USA as a country with an pathetically archaic "cowboy,war hungry attitude. We don't need to worry about terrorists destroying this country. The greedy Wall Street bastards and Republicans have done that for them.

Jack

October 2, 2008 07:56 PM

Here is a list of the senators' votes on the bailout Wednesday. I will vote against all of those who voted for the bailout. George W Bush, used the Iraq War to enrich Dick Cheney's buddies in Haliburton and now he is pushing taxpayers to pay $1 trillion to Hank Paulson's buddies in Goldman Sachs and Wall Street. We have enough! http://www.monstersandcritics.com/people/news/article_1434336.php/The_Senate_Bailout_vote_tally_complete_list

Richard

October 2, 2008 07:56 PM

As an American living and working in Japan, it is so embarassing. I really wish all my fellow Americans could consider how we are now perceived
in other countries
The USA is supposed to be the ultimate symbol of freedom and democracy..but look where we are now !? Bush and his Republican idiots are always preaching countries like China to respect human rights Well..were were our human rights and freedom for us when these greedy, incompetent Wall Street CEOs plunged us into this mess. So damm outrageous and unacceptable that the Republicans insisted on incl. major corp. tax breaks before the bailout vote. We were all deceived and betrayed by the Republicans who forced us taxpayers to pay taxpayer dollars to fund a war in Iraq that was not only unjust unnecessary..there was no reason for it. THERE WERE SIMPLY NO WEAPONS OF MASS DESTRUCTION !!
McCain would continue the arrogant cowboy policies of Bush. We really seriously need to fix this awful image of the USA as a country with an pathetically archaic "cowboy,war hungry attitude. We don't need to worry about terrorists destroying this country. The greedy Wall Street bastards and Republicans have done that for them.

Richard

October 2, 2008 08:08 PM

As an American living and working in Japan, it is so embarassing. I really wish all my fellow Americans could consider how we are now perceived
in other countries
The USA is supposed to be the ultimate symbol of freedom and democracy..but look where we are now !? Bush and his Republican idiots are always preaching countries like China to respect human rights Well..were were our human rights and freedom for us when these greedy, incompetent Wall Street CEOs plunged us into this mess. So damm outrageous and unacceptable that the Republicans insisted on incl. major corp. tax breaks before the bailout vote. We were all deceived and betrayed by the Republicans who forced us taxpayers to pay taxpayer dollars to fund a war in Iraq that was not only unjust unnecessary..there was no reason for it. THERE WERE SIMPLY NO WEAPONS OF MASS DESTRUCTION !!
McCain would continue the arrogant cowboy policies of Bush. We really seriously need to fix this awful image of the USA as a country with an pathetically archaic "cowboy,war hungry attitude. We don't need to worry about terrorists destroying this country. The greedy Wall Street bastards and Republicans have done that for them.

Richard

October 2, 2008 08:14 PM

Oh my goodness... If you seriously care about the future of our country, please check out this shocking, mind-boggling article (Thank goodness for Zakaria' guts, and for revealing the shocking and very scary truth..) Again, pls. check out this URL.. http://edition.cnn.com/2008/WORLD/americas/09/29/zakaria.sarah.palin/index.html?iref=24hours Please spread this article and the scary truth. The American public needs to know

Holly Garfield

October 2, 2008 08:59 PM

On Monday people were screaming about the idiots who were for the bailout. On Tuesday people were screaming about the idiots who voted against the bailout. What a differnce a day, and 777 Dow points, makes. We went from a possible $700 billion maximum (unlikely and in 3 steps), recoverable, 5 year cost to a $1.2 trillion equity loss in a single day. A whole bunch of Main Streeters saw (if they looked) years worth of retirement savings wiped out overnight. Oops.

Holly Garfield

October 2, 2008 09:04 PM

To Jack: I'm not sure how familiar you are with the US election system. You only get to vote for 2 Senators, those from your state, and, with 6 year terms for Senator, only a third of the Senate is up for re-election in any Congressional (even numbered) year. The House of Representatives is completely re-elected avery 2 years, but there is only one per voter.

Dennis

October 2, 2008 11:54 PM

Why is the American tax payer giving wall street an interest free loan? Each one of us will fork over roughly $2000 each to clean up a mess that leading experts in the financial industry created. They are the experts not us, so why is my hard earned money going to them as a loan? I have never received an interest free loan from a bank. Why should wall street get one? If someone can explain how the the ones that created the problems get short changed and how the savors (us) get some upside, I'll listen. Where is the equality?

Conor

October 3, 2008 12:07 AM

This had better not pass. ESPECIALLY with the new amendments.

Anyone read the one that re-writes the Internal Revenue Code to require a carbon tax within the next 2 years?

Yeah that'll be fun. I love paying for gas for my car, food for my body and products, but now I get to pay for the carbon put out by my car, factories and YES, EVEN A TAX BASED ON THE CARBON DIOXIDE OUTPUT OF YOUR LUNGS!

jw360

October 3, 2008 01:38 AM

I don't see how people think this bill is going to write down the principles of 2 million at risk mortgages. That would be a much better bailout bill if that was the case, because it would be preventing more foreclosures and putting out the fire so to speak. This bill is going to absorb all the foreclosures the banks have on the books already. All home prices are coming down with or without this bill. That means Americans are going to be paying a big price for the banking systems relaxed rules. Home values are overinflated, because it was too easy to get the loans. That caused demand to skyrocket along with home prices. Smart and or lucky people have sold their homes prior to this bubble and getting out of the market and did alright. Everyone else? Prepare to lose a lot of money. Yeah some just in value and some don't care that have their homes almost paid off anyway or have a lot of equity. But for those that bought their first homes interest only, nothing down and lost up to 50% or more of value in the home after buying it maybe 3 or 4 years ago; have not missed any payments; didn't buy more than they could afford; now can't even sell their homes unless the principle is written down. Their only options are to live there for another 10 years and hope it goes back up, or foreclose. Those are the people that need bailed out, not Wall St.
The problem with this bill is that by taking over the bank's foreclosures, this will give them even less incentive to write down the principles of these homes that are in trouble. They will simply allow even more homes to go into foreclosure and then maybe 6 months or so down the road, we'll be seeing another request for an additional 700 billion dollars to take care of even more foreclosures. Then home values of course will continue to drop. People will continue to lose equity; the economy will get even worse because people will have even less money to spend and so on. Instead the banks should hold on to the foreclosures themselves and sell them, while the government prevents even more foreclosures from happening and keep the people in their homes. This is the big flaw of this bill and really makes no sense why it's passing in this form. It needs to be directed at homeowners that are underwater and that’s all. Then at least they can sell their homes, otherwise we're looking at letting more homes go into foreclosure just so people can move. In order to make up the loss to taxpayers, there should be some kind of penalty they should pay. Add an insurance policy like Republicans were saying or something. I don't know something. But yes I do agree the banks should somehow end up paying for it, not taxpayers. Maybe add some kind of tax in order to pay for the bailout over a period of time. Make them go bankrupt and put them on the 0% bankruptcy payback plan to make up for their losses.
And here's another thought. If the government buys all these foreclosed homes from the banks and they don't sell, who is paying for the upkeep? The banks? I don't think so. If they are destroyed and need fixed up in order to sell who's going to pay for it? The Taxpayers that's who. If these foreclosures don't sell right away the government will have lost more in upkeep of the homes than they are worth and will never recover taxpayer money. This is not the same situation the government is getting into like the Chrysler Bailout where they made money. In my neighborhood there are homes that are available for a significant discount and have not sold for over a year or even two years. No joke. It's not a bad neighborhood, and they are brand new decent homes. Wouldn't it make more sense to keep people in their homes? Maybe even put people back in their homes that were foreclosed on, because of being underwater. This plan stinks. There are better alternatives and they know it. That is why over half of Congressmen voted against it. And now they are going to be for it? Why? Because it has some pork and a little horderv added on the side? Come on. This bill stunk from the beginning and still is a stinking pile of cr**.

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Washington Bureau Chief Jane Sasseen and other BusinessWeek writers cover the run-up to the Nov. 4 presidential election, paying close attention to how the candidates will handle issues such as housing, the economy, unemployment, and immigration.

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