today in black history

July 19, 2024

Writer and social critic Alice Dunbar Nelson was born in 1875 and helped shaped the Harlem Renaissance.

Deal? No Deal!

POSTED: September 30, 2008, 12:00 pm

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Like a bad version of the television game show “Deal or No Deal,” the U.S. House of Representatives voted down President Bush’s mortgage rescue plan 228 – 205, with more than 90 Democrats voting against the plan. Overall 140 Democrats and 65 Republicans voted for the plan, and 95 Democrats and 133 Republicans voted against it. The Senate had been expected to vote on the proposal on Wednesday but now both houses must regroup to find a way to strike a compromise. News of the vote sent the markets into a free fall with the Dow Jones Industrial Average down nearly 778 points in the biggest drop in history.

Following the vote Treasury Secretary Henry Paulson released a statement, saying in part, “I'm disappointed in today's vote, but leaders on both sides of the aisle worked hard. I've spoken to them and I know they share my great disappointment. We have experienced significant turmoil in our financial markets in the last few days, including the collapse of Washington Mutual and Wachovia here and the failure of two major financial institutions in Europe. Markets around the world are under stress, and that reduces the availability of credit that businesses across America depend on to meet payroll and to purchase inventories."  

The bill, formerly titled the “Emergency Economic Stabilization Act of 2008 (H.R. 3997), was the result of a weekend compromise between the White House and Congressional leaders that was expected to pass, albeit by a slim margin. Republicans on the Hill began to vent their frustration with the proposal late last week and scrambled to put forth an alternative plan. Democrats, on the other hand, spent much of late last week attempting to weave in greater protections for individual homeowners, greater oversight of financial institutions and assurances that taxpayers would benefit if market conditions improved the financial position of firms the government bailed out. In addition, Democrats sought to make sure that any rescue plan would also limit executive compensation at firms that were in distress and possible targets for a government takeover. It was one of the points Rep. Barney Frank (D-MA) chairman of the House Financial Services Committee made in an exclusive interview with en route to the White House last Thursday.

The vote came on the same day Citigroup acquired Wachovia Bank. Wachovia ended the day down 8.16 and closed at 1.84, a nearly 82 percent drop since close of trading on Friday. The bank was among several financial institutions that were feeling the effects of the market’s volatility. On NSnewstv's market watch Sovereign Bancorp was down 6.24 and finished the day at 2.33, a 72 percent falloff since Friday’s closing, and Bank of America was down 6.45 and ended trading at 30.25.

The defeat of the proposal was a major setback for the White House and Treasury Secretary Paulson in particular. While some opposition was expected from Democrats on the Hill, the push back from Republicans in the House was difficult to overcome. For many in the President’s party the proposal could not have come at a worse time as lawmakers facing re-election have to face the wrath of voters in their home districts. The public is angry over the prospect of a massive bailout of financial institutions that they blame for the country’s fiscal woes and look down upon government aid for companied they believe are to blame. Many people hold this view despite the fact that the average person is being pinched because many of the large financial institutions are struggling. Very few people make the connection between these firms and their personal economic standing, so the idea of saving a big company is perceived to be granting favors. Members of Congress on the ballot November 4 will be hard pressed to communicate the value of the bailout to the average taxpayer when hitting the campaign trail.

Further complicating efforts at passing the economic recovery package is presidential politics. While both Republican Senator John McCain and Democrat Senator Barack Obama urged passage of the bill, the proposal has become a volleyball that each side swats to the other to try to score political points. To make matters worse, the negotiations on the Hill have been tinged by partisan sniping; with Senator McCain’s campaign casting blame on the Democrats for the failure to pass the bill.

There is one thing that is certain. If Congress fails to act quickly the nation could be headed toward an economic disaster. With each passing day the public is growing weary and concerned over their personal security, and if lawmakers fail to move decisively, we may witness nervous depositors run on their banks for fear of losing their money, investors engaged in a contagious sell off and banks that are hanging on by a thread suddenly come tumbling down. For the average American the daily reports of market instability, announcements of government takeovers and news of large companies being acquired is cause for panic. If it is perceived that the federal government is unable to come to grips with this crisis, many Americans will feel compelled to protect their assets as best they can.

The House leadership, majority and minority, must now reconvene and find a way to come up with the votes to pass this bill or one that is a reasonable facsimile. It will be a tall order given all that has transpired over the last two weeks.

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