In a shocker, the US House of Representatives has voted against the US Treasury's TARP plan in its current form. The Dow Jones dropped from down -217 to -680 in less than 5 minutes on the news.
Both sides of the aisle had their voters tell them not to bail out Wall Street and both sides needed each other to get this passed. Voters were believed to be against this 10 to 1. Once it was seen that less than 100 Republicans were not going to support the bill, Democrats peeled off and voted against the measure.
This is an embarrassment to both Democrat and Republican leadership. House Republicans will be vilified in the press with headlines like "Dow Drops 700 Points As Republicans Don't Pass Bailout Plan." Rep. Barney Frank is already out saying, "Republicans killed the bill." However, this is also going to cost US Speaker of the House some credibility as she was the majority leader who brought the bill to the floor. Lastly, this could/will push the Presidential election more in favor of Democratic candidate Barack Obama.
US House Republican leader Boehner just said that the partisan speech by Nancy Pelosi on the floor just before the vote killed the effort at cooperation. If true, this is exactly the type of discussion that was going on last week when Barney Frank came out after discussions and said that progress could get done after John McCain left D.C. This is what I was talking about on CNBC on Friday when I said that the Democrats have to stop attacking the Republicans if they are serious about getting a bill done. Apparently, Speaker Pelosi choose language that clearly upset the Republicans.
Speaker Pelosi states that despite working with the Republicans they couldn't get bill done. She told Paulson that they delivered on their side of the bargain. She extends hand to Republicans to get something done. This is a good sign. Rep. Barney Frank says that we are facing a serious crisis and said that a large amount of members of the House apparently don't agree with this. He asks for better coordination the Republican side to ensure something gets done. In light of the credit crisis, Frank says this action is petty and that the real story is that the Republican leadership didn't have the votes.
I write all of this to show how far apart these sides are with their views and their ability to produce a bill that would help the nation. Both sides have failed miserably.
Last Friday I wrote, "So just how far will the Republicans allow this financial/political game of chicken go?" Let's see how their constituents react to their IRAs and portfolios sinking while they can't get a car/house loan. I wonder how bad things have to get before they change their perception and tell their Republican Congressmen/women to get a deal done? Unfortunately, we are going to have to find out before we can have a conclusion to our show." We are now at that stage.
Due to the big drop in stocks, I do believe this bill will be brought up again in a different form as the leaders of the parties will be doing some fence mending. To get this passed, there may need to be additional changes made to the bill to bring in more votes. The NYT is already reporting that House leadership will bring back the bill for a vote. We just don't know when. My guess would be that there will have to be many more provisions for Main Street vs Wall Street. Both sides now know with certainty, the rapid, negative reaction by Wall Street to their inaction. Both sides know they have to get something done soon. I think by the end of the week.
Until then, let the media war begin as we watch the stock market and US dollar tank.
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