In the House, 263 votes for, 171 votes against the resuce plan
Wall Street financial markets get the bailout
Bush signs $700 billion rescue plan after its tumultuous trip through Congress
WASHINGTON — The federal government finally came to the rescue of America’s teetering financial system Friday, as the House passed and President Bush signed a $700 billion financial industry bailout that had divided the House and roiled the presidential campaign.
“By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country,” Bush said shortly after the House passed the bill by a 263-171 margin. “We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.”
The financial markets didn’t exactly stabilize after the bill’s passage, though, as the Dow Jones Industrial Average fell 157 points on the Labor Department’s announcement that employers cut 159,000 jobs in September.
That was just one of many recent signs that the credit crisis that started with a real estate crash was hitting home across the country, and it provided further momentum to a bailout that lawmakers had been reluctant to support.
All four of Western New York’s representatives — including Rep. Randy Kuhl, the Hammondsport Republican who had been opposed — voted for it.
Kuhl initially had been reluctant to put the bailout’s burden on the taxpayers. But in what he called “the most difficult decision I’ve had to make in my entire political career,” he changed his mind on the bill after hearing from businesspeople throughout his district.
“All of them told me that if this isn’t settled almost immediately, then the credit markets would stay closed and we’d have a severe impact on jobs in Western New York,” Kuhl said. “That’s what motivated me.”
Kuhl was one of 25 Republicans who, along with 33 Democrats, switched their vote between Monday and Friday.
In the interim, the Senate sweetened the bill by increasing the cap on federally insured bank deposits from $100,000 to $250,000 and by loosening accounting rules that were dragging down the value of some bank assets.
In addition, the Senate added $110 billion in popular tax and spending measures, including one that will prevent middle-income taxpayers from being forced into paying higher taxes under the Alternative Minimum Tax, a measure long pushed by Rep. Thomas M. Reynolds, R-Clarence.
“This bill is not a good bill but a necessary one,” said Rep. Brian Higgins, D-Buffalo. “And as frustrating as this has been to the American people, the last two weeks of legislative negotiations has produced some changes that make this bill better for taxpayers than the ‘blank check’ initially proposed.”
The bill’s passage capped a remarkable three-week period that started with the takeover of Wall Street titan Merrill Lynch, the collapse of the venerable Lehman Brothers investment house and the government rescue of insurance giant AIG.
With Wall Street’s remaining investment houses and several major banks on the verge of collapse, Treasury Secretary Henry Paulson went to top lawmakers on Sept. 19, demanding quick action.
Paulson proposed using up to $700 billion in government money to buy up the toxic mortgage-backed securities that were dragging down major lenders and causing a credit crunch, but lawmakers balked, insisting that taxpayer protections be built into that plan.
Not long afterwards, the Republican candidate for president, Sen. John McCain of Arizona, suspended his campaign to help broker a compromise, only to see talks break down.
House negotiators finally reached a deal last Sunday, only to see the original bill die on Monday amid a bipartisan rebellion.
Lawmakers started switching sides, though, after the Senate passed the bill by a 74-25 margin on Wednesday and as both McCain and his Democratic rival, Sen. Barack Obama of Illinois, lobbied for them to support the financial rescue.
Several members of the Congressional Black Caucus said Obama’s commitment to help homeowners facing foreclosure helped swing their votes.
“I have decided that the cost of doing nothing is greater than the cost of doing something,” said Rep. John Lewis, D-Ga.
That was the argument that the bill’s supporters have made all along.
“Like so many Americans, I have absolutely no interest in bailing out any of the ‘fat cat’ executives on Wall Street,” said Rep. Louise M. Slaughter, D-Fairport. “However, this crisis is bigger than corporate greed. It reaches beyond Wall Street and directly into the lives of hardworking, middle-class Americans.”
Reynolds agreed.
“Without action today, my constituents face the reality of losing their jobs, their homes, their 401(k)s, and their pensions,” Reynolds said. “Community banks and small businesses all across our region will be at risk and our children’s college educations will be put in jeopardy.”
That sense of impending doom brought House Speaker Nancy Pelosi, D-Calif., and Minority Leader John Boehner, R-Ohio, together to support the bill.
“The urgency is clear,” Pelosi said. “We hear it from our friends and our neighbors. We hear it everywhere we turn.”
Meanwhile, Boehner said: “We all know that we are in the midst of a financial crisis. And we know that if we do nothing, this crisis is likely to worsen and to put us into an economic slump like most of us have never seen.”
The House action brought a sense of relief to everyone from Paulson to the bankers of Western New York.
“It was a vote to protect the American people, to protect their jobs, their economic well-being,” said Paulson, who would not say how the government would end up purchasing the financial industry’s troubled assets.
Sterling Kozlowski, Western New York district president for KeyCorp, the No. 3 bank in the Buffalo area, said it was unclear whether the bank would benefit at all from the bill, given that it lacks the toxic assets that are poisoning other lenders.
“On the whole, it’s a very positive step for the country,” Kozlowski said. “It certainly keeps the financial system from freezing up. That’s the hope of the bill, of course. We hope also that it has a minimal impact on the taxpayers.”
With the bill’s passage, Congress adjourned for the year, and lawmakers returned to their districts to campaign.
But many lawmakers expect Congress to take up a series of new proposals next year aimed at preventing future financial calamities.
New regulations governing exotic financial products, such as “credit default swaps” that insure the value of mortgage- backed securities, are likely to be proposed, as well as a sweeping reorganization of the Securities and Exchange Commission and the Commodity Futures Trading Commission.
In other words, a long period of deregulation of the financial industry may be coming to a close.
“The Enron scandal of 2001 and the Wall Street collapse of 2008 serve as tragic bookends to a failed philosophy that less regulation, less government oversight, is always better,” Higgins said.
News Staff Reporters Phillip Lucas and Jonathan Epstein and the Associated Press contributed to this report.
