Susan Walsh/AP
House Minority Whip Roy Blunt, R-Mo, speaks to reporters on Capitol Hill in Washington after
the House vote on the financial bailout package failed.

Government Bailout Plan Falls in the House

September 29, 2008 02:18 PM
by Josh Katz
The House rejected the government’s revised $700 billion bailout plan today, thanks mainly to Republican opposition.

House Rejects Revised Plan

By a vote of 228 to 205, the House of Representatives rejected the 110-page, $700 government bailout package in a three-hour session today, and the Dow plummeted in response. Congressmen in favor of the legislation pledge to bring up another vote soon.

Those opposed to the legislation claimed that it was developed too hastily, and objected to such an exorbitant use of taxpayer money for the benefit of irresponsible Wall Street firms.

“The House debate was heated and, occasionally, emotional up to the last minute,” according to The New York Times.

House Democrats voted in favor of the bill by a vote of 140-95, while Republicans rejected it 65-133. With the Senate seemingly in support of the legislation, the House Republicans were the last block of Congress with reservations about the deal,” according to Forbes.

Congress’s Web site provides the results from the vote, and how each congressperson voted.

Through the financial bailout package, the federal government would purchase bad mortgage-backed securities. The original plan, created by the Bush administration, was three pages long.

Republicans in the House objected to the original bill last week partly because it lacked an insurance program. The new $700 billion bailout plan incorporates an insurance program, under which “premiums would be paid by the companies that sought the insurance, which Republicans argued would reduce the amount of taxpayer money needed for the purchase program,” according to the Los Angeles Times. The new plan also gives taxpayers the opportunity to profit if the companies being bailed out profit.

“At the end of the day, there really are no taxpayer funds at risk here,” said House Minority Leader John A. Boehner, R-Ohio, in regard to the insurance plan.

The plan also limits the salaries for the senior Wall Street executives if their companies sell mortgage assets to the government. The new agreement would also ban such companies from issuing “golden parachutes” to their top five executives, CNN reports.

A five-member board would oversee the implementation of the package, consisting of the “secretaries of the Treasury and of Housing and Urban Development, the chairmen of the Fed and Securities and Exchange Commission, and the director of the Federal Home Finance Agency,” The Economist writes. There would also be a congressional oversight panel.

A Sept. 24 USA Today/Gallup Poll had indicated that only 24 percent of Americans supported the government’s original bailout plan, according to The Economist.

Background: Thursday’s ‘agreement’

The government bailout plan fell apart the night of Thursday, Sept. 25, even though a three-hour afternoon session of Congress ended that day with what appeared to be a bipartisan agreement for the $700 billion endeavor. President George W. Bush addressed the nation Friday morning, reiterating the gravity of the moment and saying that he believed a successful plan will go through.

The deal collapsed after Republicans advocated a “competing bill,” according to The Wall Street Journal.

House Republicans had championed a competing plan that, “instead of relying heavily on taxpayer money, could let banks buy insurance for the troubled assets weighing down their books,” the Journal wrote.

Democrats criticized Ariz. Sen. John McCain, who on Wednesday announced that he would temporarily suspend his campaign to deal with the economic crisis, for contributing to the bill’s downfall. Sen. McCain’s aides contended that the House Republicans opposed the plan anyway.

Treasury Secretary Henry Paulson pleaded with Democrats to stick with the deal, and a bipartisan group involving Paulson met at 9 p.m., lasting about an hour. “I know how frustrated you are by what happened. Let me work this out. Don’t blow it up," House Financial Services Committee chairman Barney Frank, D-Mass., recalled Paulson as saying, the Boston Globe reported.

The House and the Senate had ostensibly come to an agreement on an outline for the government’s $700 billion Wall Street bailout plan Thursday afternoon. In a meeting that lasted almost three hours, they made some revisions to the original rescue plan.

Although work remained to be done on the bill before it could be finalized, “lawmakers in both parties said that few substantive differences and no major obstacles remained,” The New York Times reported.

In that plan, the Treasury Department would “buy up bad mortgage securities from banks in an effort to get them to lend again,” according to CNN. The main revisions to the bill involved the disbursement of money to the government, and executive pay. With the bill, Congress would have dispersed the $700 billion in installments. Pay for the executives of firms seeking government help would have be limited. The bill also gave the government equity in some of the firms “so that taxpayers have a chance to profit if the companies prosper in the months and years ahead,” The New York Times wrote.

Under Thursday’s proposal, Congress would have allocated $250 billion for the bailout right away, and then another $100 billion. Congress would have been able to withhold the remaining $350 billion by overriding a presidential veto, according to Politico.

The accord came before the meeting involving Bush, McCain, Obama, and congressional leaders.

Related Topic: The real cost of the bailout


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