[Reader-list] $US700b bailout deal voted down

[Jeebesh]

$US700b bailout deal voted down
ANNE DAVIES
30/09/2008 9:59:00 AM
Wall Street's benchmark Dow index has suffered its worst single-day  
points hit ever after a $860 billion ($US700 billion) financial  
bailout package failed to pass the US House of Representatives.

- $US700bn bailout voted down

- Dow index loses 778 points

- Biggest daily decline since '87 crash

The Dow lost about 778 points, or 6.98%, posting its biggest daily  
percentage decline since the October 1987 stock market crash, while  
the benchmark S&P 500 also had its worst day in 21 years after the  
House sent the bailout plan to defeat by a vote of 228 to 205.

The record Wall Street stock plunge overnight wiped approximately  
$US1.2 trillion ($1.45 trillion) off the market value - the first-ever  
trillion-dollar one-day loss.

The 6.98% drop, however, does not make the top 10 greatest percentage  
losses.

By contrast, on ''Black Monday'', October 19, 1987, the Dow Jones  
index dropped by 22.61%.
Market fear was deep and widespread, as investors dumped stocks for  
the relative safety of US government bonds. The Chicago Board Options  
Exchange Volatility Index, Wall Street's main barometer of investor  
fear, jumped 39% to 48.40, a nearly six-year high, and was at 46.72 at  
the close.

''I am shocked. Credit markets were struggling even with the prospect  
this bill was going to get passed. Now the bill doesn't get passed and  
it just throws one more monkey wrench into the mix,'' said Bob Doll,  
global chief investment officer of equities at BlackRock Inc, one of  
the world's largest asset managers.

The failure of the bailout bill means the US Treasury now has very  
limited capacity to bailout firms in the future, and economists are  
predicting that credit markets will seize up, preventing businesses  
and people from getting loans for ordinary day-to-day business  
activities, for college fees, for cars, and for appliances as well as  
for housing. Consumer and business interest rates are likely to rise  
sharply.

House leaders from both parties warned members that without the bill,  
America was standing on a financial precipice, which could send the US  
economy into a deep recession.

The defeat of the bill came despite impassioned pleas by the  
leadership of both Republican and Democrat parties to vote for it. But  
132 Republicans and 94 Democrats voted against it. Most had expected  
that more Republicans would support it as it was an administration bill.

The House leaders were scrambling to find a procedural way to bring  
the bill back before Congress before the members go home later today  
to begin campaigning for re-election.


The overriding question for congressional leaders was what to do next.  
Congress has been trying to adjourn so that its members can go out and  
campaign. And with the November 4 Election Day looming, there was no  
clear indication of whether the leadership would keep them in  
Washington. Leaders were huddling after the vote to figure out their  
next steps.


Lawmakers are unlikely to vote again on a bailout of the US financial  
system before Thursday, a Democratic lawmaker said, citing the coming  
Jewish holiday. On Tuesday and Wednesday, the House will be in a two- 
day recess to observe Rosh Hashanah.


A White House spokesman said that US President George Bush was ''very  
disappointed" the bill had failed.


''There's no question that the country is facing a difficult crisis  
that needs to be addressed,'' Tony Fratto told reporters. He said the  
president will be meeting with members of his team later in the day  
''to determine next steps.''


''Obviously we are very disappointed in this outcome,'' Fratto said.  
''There's no question that the country is facing a difficult crisis  
that needs to be addressed. The president will be meeting with his  
team this afternoon to determine the next steps and will also be in  
touch with congressional leaders.''


The mind-numbing vote had been preceded by unusually aggressive White  
House lobbying, and spokesman Tony Fratto said Bush had used a call  
list of people he wanted to persuade to vote yes as late as just a  
short time before the vote.


Lawmakers shouted news of the plummeting Dow Jones average as  
lawmakers crowded on the House floor during the drawn-out and tense  
call of the roll, which dragged on for roughly 40 minutes as leaders  
on both sides scrambled to corral enough of their rank-and-file  
members to support the deeply unpopular measure.


They found only two.


Bush and his economic advisers, as well as congressional leaders in  
both parties had argued the plan was vital to insulating ordinary  
Americans from the effects of Wall Street's bad bets. The version that  
was up for vote today was the product of marathon closed-door  
negotiations in Congress over the weekend.


''We're all worried about losing our jobs,'' Rep. Paul Ryan, a  
Republican, declared in an impassioned speech in support of the bill  
before the vote.


''Most of us say, 'I want this thing to pass, but I want you to vote  
for it - not me.''


With their dire warnings of impending economic doom and their sweeping  
request for unprecedented sums of money and authority to bail out cash- 
starved financial firms, Bush and his economic chiefs have focused the  
attention of world markets on Congress, Ryan added.


''We're in this moment, and if we fail to do the right thing, Heaven  
help us,'' he said.



Asked whether majority Democrats would try to reverse the stunning  
defeat, House Majority Leader Steny Hoyer said, ''We're certainly not  
going to abandon our responsibility. We'll continue to focus on this  
and see what actions we can take.''


Several Republican aides said the leader of the House, Speaker Nancy  
Pelosi, a Democrat, had torpedoed any spirit of bipartisanship that  
surrounded the bill with her scathing speech near the close of the  
debate that blamed Bush's policies for the economic turmoil.


Without mentioning her by name, Representative Adam Putnam, the No. 3  
Republican, said: ''The partisan tone at the end of the debate today I  
think did impact the votes on our side.''


Putnam said lawmakers were working ''to garner the necessary votes to  
avoid a financial collapse''.


But the defeat was already causing a brutal round of finger-pointing.


''We could have gotten there today had it not been for the partisan  
speech that the speaker gave on the floor of the House,'' House  
minority leader John Boehner said. Pelosi's words, the Republican  
said, ''poisoned our conference, caused a number of members that we  
thought we could get, to go south.''

Representative Roy Blunt, the Republican No. 2, estimated that  
Pelosi's speech changed the minds of a dozen Republicans who might  
otherwise have supported the plan.


Representative Barney Frank, a Democrat, scoffed at the explanation.


''Well if that stopped people from voting, then shame on them,'' he  
said. ''If people's feelings were hurt because of a speech and that  
led them to vote differently than what they thought the national  
interest (requires), then they really don't belong here. They're not  
tough enough.''


More than a repudiation of Democrats, Frank said, Republicans' refusal  
to vote for the bailout was a rejection of their own president.


''The Republicans don't trust the administration,'' he said. ''It's a  
Republican revolt against George Bush and John McCain.''


In her speech, Pelosi had assailed Bush and his administration for  
reckless economic policies.


''They claim to be free market advocates when it's really an anything- 
goes mentality: No regulation, no supervision, no discipline. And if  
you fail, you will have a golden parachute and the taxpayer will bail  
you out. Those days are over. The party is over,'' Pelosi said.


''Democrats believe in a free market,'' she said. ''But in this case,  
in its unbridled form, as encouraged, supported, by the Republicans -  
some in the Republican Party, not all - it has created not jobs, not  
capital. It has created chaos.''

http://www.canberratimes.com.au/news/world/world/general/us700b-bailout-deal-voted-down/1321248.aspx