House Decides Bailout

by John M. Curtis
(310) 204-8700

Copyright October 2, 2008
All Rights Reserved.                    

              Passing a new bailout bill, the U.S. Senate tossed the nation’s hottest potato to House of Representatives to once again pass urgent financial rescue legislation strongly lobbied by the White House.  Rejecting President George W. Bush's last request Sept. 28 [228-205], all eyes are back on the House slated to vote Oct. 3 on the Senate’s revised bill.  Many House leaders oppose the legislation because they no longer trust the White House to mange the country’s tax dollars.  Bush’s approval ratings have plummeted below 28%, giving little clout on Capitol Hill only one month before presidential elections.  Tonight’s vice presidential debates will prove pivotal for GOP presidential nominee Sen. McCain (R-Ariz.) whose polls fell 10% in the last week.  Palin’s performance promises to be a deal-breaker, where the nation gets growing doubt about a McCain-Palin ticket.

            House members, both Republicans and Democrats, have received overwhelming opposition from constituents, opposed to sticking taxpayers with a whopping $700 billion price tag.  No economist can predict with any certainty whether the bailout will improve frozen credit markets, causing havoc in business and industry.  House members refuse to let Wall Street dictate the bailout.  When the House defeated the bailout, the market dropped 775 points.  One day later, the same market pushed the Dow Jones Industrials up 485 points on speculation that they’d eventually get the bailout.  No reputable economist can tell whether $700 billion will un-stick gummed-up credit markets.  Bush argues, with 28% approval ratings, that some bailout is better than nothing.  His plan, supported by Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Hank Paulson, expects blind faith.

            While some plan will no doubt emerge soon, many Democrats and Republicans don’t trust the president with a blank check.  Bush urges quick approval but doesn’t have the credibility to lead his party.  May respected Republicans believe the two-term resident of Crawford, Texas has destroyed the Republican Party.  Bush’s low approval ratings have jeopardized GOP candidates around the country.  McCain continues to slip in the polls because average Americans no longer trust the president to manage the economy.  They believe a McCain presidency would follow the same economic policies as Bush.  There’s enough fear in markets for the House to pass some type of bailoutl.  Whether you call it a “rescue plan” or bailout, it still adds about  $1-trillion to the national debt.  Some members of the House still believe that without a bailout the markets will eventually self-correct.

            Bush has squandered so much credibility that his own party has difficulty going along with another harebrained scheme.  Faced with reelection, some House members wish to pass the task of rebuilding financial markets to the next president.  Others agree with Bush that time is of the essence.  “Monday what we had was a bailout for Wall Street firms and not much relieve for taxpayers and hard-hit families.  Now we have an economic rescue package,” said GOP Florida Rep. Ileana Ros-Lehtinen, switching her no vote to yes when the House convenes Oct. 3.  “I don’t think that any changes here will do what we need to do, which is right now to send a message of confidence to markets that Congress will act,” said House Speaker Nancy Pelosi (D-San Francisco), reacting to the flurry of demands from Democrats and Republicans.  Some key changes were incorporated into the new legislation.

            Upping Federal Deposit Insurance Corporation coverage from $100,000 to $250,000 helped get more GOP support.  New rules by the Securities and Exchange Commission to force companies to devalue assets helped bring the GOP into the fold.   Several tax breaks for businesses were also included in the Senate bill, making the bailout more appealing to Republicans also increase the chance of passage.  Extending the deductibility of state and local taxes for states without income tax also appealed to Republicans.  Even if the stock market reacts positively Friday, the economy still faces a tough row to hoe.  Rising unemployment and lowered factory output signals recession.  Buying up bad debt and making cash more available to credit markets can only help the current anemic economy.  All current add-ons to the bill bode well when it comes to the next vote.

            Senate negotiators came up with a revised bailout plan now appealing to a majority in the House.  Upping the FDIC insurance and extending the deductibility of state and local taxes also appealed to the GOP opposed to the first version.  No one, including Federal Reserve Chairman Ben S. Bernanke, knows whether the $700 billlion-plus rescue plan will actually unfreeze credit markets or ultimately help the economy.  Passing some bill should help reassure the stock and credit markets that Uncle Sam refuses to let the economy go down without a fight.  Extending certain business tax breaks, limiting the alternative minimum tax and providing $8 billion in tax relief to businesses and individuals hit by natural disaster all attempt to reassure struggling financial markets.  If everything goes according to plan, the House will do its part to fix nation’s broken economy.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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