House to Wall Street: Drop Dead

The House of Representatives has rejected the proposed rescue plan for the financial sector. The stock market reacted to the news by dropping nearly 7% of its value—778 points.

NEW YORK (CNNMoney.com) — The fate of the government’s $700 billion financial bailout plan was thrown into doubt Monday as the House rejected the controversial measure.

The next steps were unclear. The abrupt defeat left the Bush administration and congressional leaders scrambling to figure out whether to renegotiate the bill and introduce it again as soon as Thursday or to try other options.

Stock markets reacted violently. Investors who had been counting on the rescue plan’s passage sent the Dow Jones industrial average down well over 700 points. The stock gauge closed 778 points lower – nearly 7%. (Full coverage)

The measure, which is designed to get battered lending markets working normally again, needed 218 votes for passage. But it came up 13 votes short of that target, with a final vote of 228 to 205 against. Two-thirds of Democrats and one-third of Republicans voted for the measure.

I’ve put most of my comments on the rejection of the plan over at Outside the Beltway. I have no comment on the pragmatics of this move since I have no more idea than anybody else of whether the plan would work or what its secondary effects might be. Politically, I think the House Republicans have miscalculated.

This was a plan submitted by a Republican administration and Nancy Pelosi had demanded substantial support from Republicans before she’d commit to imposing discipline on Congressional Democrats. That failed and I think that it’s quite unlikely that any plan proposed hereafter will be more palatable to the House Republicans.

But now the Republicans, demonstrating the same unerring instinct for self-destruction that the Illinois Republican Party has in recent years, have taken ownership of any economic problems that rise in the fallout of the plan’s failure to pass. If any problems are minor or short-lived, they won’t get credit. Nobody gets credit for things that don’t happen.

It was nice living under a two party system with a halting imperfect market system. Now the entire country will be Chicago.

5 comments… add one
  • Andy Link

    I’m unfamiliar with Chicago except for what I see in the movies. Is that what I can expect?

  • Chicago is very efficient, “The City That Works”. It’s also very corrupt and undemocratic. Most elective offices are lifetime tenure. It really doesn’t matter much what they do.

  • PD Shaw Link

    Yes, Dave, but “Chicago” extended to the entire state of Illinois doesn’t seem to work very well.

    But I think Dave is right. It’s not that this plan would definitely work; it’s that now that a majority of Congressional Republicans have defeated it and tough times are bound to follow, the Republicans will be to blame. I am thinking more Great Depression. Not that the banking crisis will be that bad, but a generation will have to pass before the blame loses steam.

    But there is time for a revote and Pelosi might throw a bone because she (not the Democrats) might be at some personal risk of losing her leadership.

  • Larry Link

    The failure to pass the bailout, even with it’s flaws was a mistake, the reason it failed to pass was political, from both sides of the aisle. The price to be paid for this failure will hurt those who have had little interest in politics until recently..I hope we take this coming opportunity, in November, to change a few seats in government, and then a few more two years from now.

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