Economic Unease Boosted Bailout

Posted October 3, 2008 at 1:58pm

The House resoundingly passed the $700 billion financial rescue package Friday in a 263-171 vote, reversing course from earlier in the week.

Liberals and conservatives alike cited growing fears about the spreading credit crisis for switching their votes, with 32 more Democrats and 26 more Republicans supporting the legislation compared with Monday’s failed 205-228 vote.

Some were stunned at Monday’s 777-point drop in the Dow Jones industrial average. Some prayed. Many heard from businesses that had their access to credit choked off, or from fearful seniors worried because their savings and investments had shrunk dramatically. Some said they were convinced by a phone call from Democratic presidential nominee Sen. Barack Obama (Ill.). Others said they weren’t convinced of the severity of the credit crunch Monday but are now.

“I’ve heard from literally hundreds of small businesses who are having trouble getting credit and hundreds of seniors worried about their pension funds,” Rep. Jim Ramstad (R-Minn.) said.

“Either you believe there is a credit crisis or you don’t believe there is a credit crisis,” Rep. Sue Myrick (R-N.C.) said. “I believe there is a credit crisis.”

Myrick said she stood by her Monday vote because it brought changes, including an increase in Federal Deposit Insurance Corp. insurance to $250,000.

“This is not about the politics,” she said. “I may lose this race because of this vote. That’s OK.”

The Senate passed the bailout, 74-25, Wednesday night after adding tax extenders and other tax provisions. The bill now goes to President Bush, who said he would sign the measure as soon as he gets it. Speaking in the Rose Garden, Bush offered a rare thanks to the House Democratic leadership for helping the White House and GOP leaders pass the bill, singling out for praise Speaker Nancy Pelosi (D-Calif.), House Majority Leader Steny Hoyer (D-Md.) and others whose names the president rarely mentions in a positive light.

“Thanks to the hard work of Members of both parties and both houses, and a spirit of cooperation between Capitol Hill and my administration, we completed this bill in a timely manner,” Bush said.

The president warned that the legislation will take time to have an impact on the economy and that the administration will work carefully on the rules for the initiatives in the measure before putting them into effect. “We will take the time necessary to design an effective program that achieves its objectives and does not raise taxpayer’s dollars,” he said.

Rep. Mike Conaway (R-Texas) said that while Bush called him every day this week, except Friday, it was his growing concern about the economy that prompted him to change his vote.

“Lending is the lubricant that oils the gears of this economy,” he said. “We have a failure of that system.”

The pressure was also enormous from corporate America.

Rep. Joe Knollenberg (R-Mich.) said that he had been feeling uneasy “from the moment I voted no last week” and that he decided to switch his vote after getting substantially more calls from constituents this week who favored the plan. Knollenberg also said he spoke with several auto industry executives, including the chief executive officer of General Motors Corp., and with financial service industry heads.

“I’ve never talked to so many bank presidents in my life,” he said.

Rep. David Hobson (R-Ohio), who remained a yes vote, said this week’s drama in the House could have been avoided if Treasury Secretary Henry Paulson and his staff had simply listened to him and Rep. Dave Camp (R-Mich.). Both told Treasury staffers repeatedly that the government needed to change business accounting rules as well as raise the limits on federally insured bank deposits.

“They didn’t listen until it was too late and then you make the Senate heroes,” a clearly frustrated Hobson said. “Now we have this porked-up bill. It didn’t have to happen this way.”

House GOP leaders, who had been embarrassed by the 2-to-1 whipping they took from their own Members on Monday, emerged from a somber Conference meeting Friday morning saying they hadn’t taken anything for granted.

Minority Leader John Boehner (R-Ohio) said the bill improved this week as a result of resistance from House Republicans.

“The House Republicans have stood on principle, and we’ve made this better,” he said. “Is it perfect? No. But it’s better than it was a week ago.”

Boehner later teared up as he called for help from God and warned his colleagues of tough times to come: “Let’s not kid ourselves. We’re in the midst of a recession. It’s going to be a rough ride, but it’s going to be a lot rougher if we don’t pass this bill.”

Minority Whip Roy Blunt (R-Mo.) said constituents are starting to realize the impact of the credit crunch on their pension plans and the broader economy, and they were calling Members urging support. The FDIC change and added tax breaks also appealed to GOP Members.

They ended up with 91 Republican votes, still shy of half of the Conference; the bulk of the party’s most conservative Members remained opposed.

Liberal Democrats were swayed in part by commitments from Pelosi and Obama to keep the spotlight on the issues of preventing foreclosures and reforming the financial system.

Obama told Rep. Elijah Cummings (D-Md.) that changing the bankruptcy laws to mitigate foreclosures would be a top priority for him, Cummings said.

“That meant a lot to me,” Cummings said. “It’s not every day the next president of the United States says his priority matches your priority.”

Among the liberal Members who jumped on board were Progressive Caucus co-chairs Lynn Woolsey (Calif.) and Barbara Lee (Calif.), freshman blogosphere darling Donna Edwards (Md.), civil rights icon John Lewis (Ga.) and Jesse Jackson Jr. (Ill.).

Rep. John Yarmuth (D-Ky.) said he was a reluctant flipper. “I hate this bill, and I hated the bill we had Monday. I hate this bill a little less,” Yarmuth said. The Kentucky freshman said he has a “fairly low level of confidence” that the bailout will work but nevertheless believed “the risk of doing nothing is far too great to take.” Blue Dog Democrats who had barked about the inclusion of a $150 billion tax package without fully complying with pay-as-you-go budget rules ultimately hung firm and voted for the package anyway.

Pelosi, for her part, dialed back her speech on the floor, removing any partisan references after GOP leaders complained on Monday about her floor comments.

And in another sign of bipartisan comity, Hoyer appeared with Blunt after the vote, and they credited Obama, GOP presidential nominee Sen. John McCain (R-Ariz.) and Bush for making calls around the clock.

But Members talking to their local business leaders who were under stress was the biggest key.

“The Democratic process worked,” Hoyer said. Members “went home and they found out this wasn’t about Wall Street.”

Immediately after the vote, House Democratic leadership pivoted to what they said will come next — hearings to investigate the causes of the market meltdown and new regulations to ensure it doesn’t happen again. They also got on campaign footing, obliquely criticizing Republican economic policies they said contributed to the mess.

“Our eye is now to the future, to shine the bright light of accountability on what has happened in our financial markets so that it doesn’t happen again,” Pelosi said.

She asserted Democrats believe in free markets, “but recently, left unregulated, undisciplined, and unsupervised, they created chaos. That was then, this is now.”

Financial Services Chairman Barney Frank (D-Mass.) called for a fundamental overhaul of financial markets regulation “comparable to what Franklin Roosevelt and the Congress did in the New Deal,” to place new constraints on risk-taking that he said contributed to the current crisis.

Pelosi signed the bill — “on behalf of Mr. And Mrs. Jones of Main Street” — in an impromptu enrolling ceremony in the middle of a post-vote press conference.

Blunt, meanwhile, was relieved it was finally over.

“The last time I ate a vegetable was two weeks ago,” he said.

Keith Koffler, Tory Newmyer, Emily Pierce and Emily Yehle contributed to this report.