What Went Wrong—Forces Lined Up Against Bailout
In the end, the financial markets did not stand a chance against voter antipathy, partisanship and election year politics.
The defeat of the extraordinary $700 billion financial rescue package represented a perfect collision of the forces of modern politics—a fast-moving Internet campaign, vulnerable incumbents, a weakened and unpopular president, and a roiling presidential campaign—all working against the so-called Masters of the Universe.
Polls showed widespread public opposition to the plan—the biggest federal intervention in financial markets since the Great Depression of the 1930s—and many Republicans saw such an enormous set-aside of taxpayer money as an unnecessary intrusion into free markets. Of the 19 most-endangered House incumbents, 13 voted no.
"This is one of those scenarios where nobody really wanted to do it," said House Republican Whip Roy Blunt of Missouri, who played a leading role in the final negotiations.
Such a roaring confluence of opposition could only have been overcome with strong party discipline and presidential power. But a weakened and unpopular President George W. Bush and lawmakers forced to weigh the vote against their political careers conspired against success.
Outside Congress, however, furious pressure built up against the bill in e-mail campaigns and on Internet Web sites. The Club for Growth, a conservative free-market oriented group, warned lawmakers that it would count a vote in favor of the legislation against lawmakers seeking the group's support. The Club for Growth is viewed with apprehension by many Republicans because it has been known to support challengers running against party incumbents in primary contests.
Longtime conservative activist Richard Viguerie warned that lawmakers who voted for the rescue package would be targeted for defeat. "Republicans and Democrats alike who support this monstrosity will face the wrath of the voters if they stand side-by-side with predatory politicians and bureaucrats and their greedy friends who got us in this mess," he said.
The opposition on the House floor came from an unlikely coalition of conservatives and liberals. The progressive grassroots group MoveOn.org aired an ad blaming the financial crisis on John McCain and his allies.
All those forces worked against powerful special interests. The U.S. Chamber of Commerce and a diverse group of industry lobbying organizations ranging from the National Association of Realtors to the American Hotel and Lodging Association pressed Congress to back the bill, pointedly noting that they too would consider this a key vote when ranking members.
The vote also represented an extraordinary rejection of Bush, who personally called wavering lawmakers and delivered a last-ditch public appeal Monday morning, as well as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.
"Despite days of negotiating, this is still the same bailout bill, written by a Wall Street guy with a Wall Street solution to a problem created on Wall Street," said Rep. Mike Rogers, a Michigan Republican. "This bill was still a blank check to Henry Paulson."
The vote also did nothing for the presidential contenders, Democrat Barack Obama and Republican John McCain. Both stepped into the fray last week and boasted of exercising leadership in the negotiations. Not only did a majority of McCain's Republican colleagues vote against it, so did all his fellow Arizona lawmakers. Obama was unable to sway many House liberals, including a majority of the Congressional Black Caucus.
House Republican leader John Boehner of Ohio, in a crowded Capitol corridor after the vote, accused House Speaker Nancy Pelosi of delivering a partisan pre-vote speech that caused some Republicans to refuse to back the proposal.
Blunt said the speech could have cost the bill about 12 Republican votes. He did not identify those lawmakers.
Pelosi earlier had delivered a tough attack on Bush economic policies and a "right-wing ideology of anything goes, no supervision, no discipline, no regulation" of financial markets -- a pointed critique not much different than what she has been saying for days.
But Boehner said Pelosi's speech "poisoned our conference, caused a number of members that we thought we could get, to go south."
House Banking Committee Chairman Barney Frank, a Massachusetts Democrat who is known for his quick, often acerbic wit, said the Republican leaders' complaints meant that some Republicans "decided to punish the country" because their feelings were hurt.
"Give me the names of those 12 people and I'll go talk uncharacteristically nice to them," he said.