In its largest one-day point drop ever, the Dow Jones
industrials lost nearly 780 points as investors feared that the
failure of the government’s financial rescue plan in the House will
force the country into a worsening credit and economic crisis.
In its largest one-day point drop ever, the Dow Jones industrials lost nearly 780 points as investors feared that the failure of the government’s financial rescue plan in the House will force the country into a worsening credit and economic crisis.
The Gilroy area’s three Democratic representatives voted in favor of the bill that failed by 13 votes. On Capitol Hill, Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a reworked version.
The plan lawmakers voted down Monday was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government would ultimately be reimbursed by the companies for any losses. The Treasury would have been permitted to spend $250 billion to buy banks’ risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at the president’s discretion and a final $350 billion if Congress signs off on it.
Gilroy’s representatives – all of whose official Web sites were overwhelmed with traffic Monday as constituents rushed to get information about the bill – agreed that the plan was the only immediately foreseeable way to prevent America’s economic cogs from grinding to a halt after years of what they generally described as the Bush administration’s misguided market-knows-all approach.
“This vote was as difficult and as heart wrenching as any I have taken in my two years in office,” Jerry McNerney, D-Pleasanton, wrote in a statement Monday. “I could not, in good conscience, vote against what appears to be the only plan available to stabilize the economy.”
McNerney went on to describe the plan as “far from perfect” but said it “had many provisions which I felt justified its passage, including: protection of American taxpayers, assistance for families facing the prospect of foreclosure, and limits on executive pay.”
Those were also important factors for Zoe Lofgren, D-San Jose, who stressed in a written statement that America’s “frozen” credit markets needed immediate thawing to sustain the U.S. economy.
“The everyday transactions of businesses and individuals rely on credit. Businesses may be unable to buy goods on credit, employers may no longer be able to tap credit lines for payrolls, farmers may be unable to buy seed and feed on credit, students may able to secure loans to pay for college only from the U.S. Treasury, and consumers may be unable to obtain credit for purchases,” which accounts for about two-thirds of U.S. economic activity.
She also said, “Unless efforts are made to stabilize the housing foreclosure crisis by providing remedies to individual homeowners, the origin of this crisis will remain and the Administration proposal will not provide a lasting answer.”
Representative Mike Honda, D-Campbell, also faulted the Bush administration and praised the revised bill’s new oversight provisions and taxpayer protections. He agreed with McNerney and Lofgren that relieving credit markets was of the utmost importance.
“I voted for this plan because I believe we need to rescue the troubled credit and financial markets to stabilize our economy; because I believe that we should do it in a way that reimburses the taxpayers for every dime as the plan begins to work; and that we should reform how business is done on Wall Street,” Honda wrote in a statement. “I wish the Administration had not brought us to this point. It forced us to make painfully, hard decisions to forestall harder times. I hope we will soon be able to enact a solution that will bring stability to our financial market.”
He added, “When I cast my vote, I thought about the family in San Jose about to lose their home. I thought about the retiree whose pension is evaporating after decades of toil; and the small business owner who might not be able to meet payroll because the bank will not extend credit.”
Republicans blamed the bill’s failure on Pelosi’s speech near the close of the floor debate Monday, She assailed Bush’s economic policies and a “right-wing ideology of anything goes, no supervision, no discipline, no regulation” of financial markets. Pelosi could not be reached for comment Monday afternoon, but other leading Democrats countered that the Republican caucus just didn’t have enough votes.
The plan’s defeat came amid more reminders of how troubled the nation’s financial system is – before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies – Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.
Reporter Chris Bone contributed to this report.
