U.S. lawmakers rebel against bailout plan. In a moment of historic drama in the U.S. Capitol and on Wall Street, the House of Representatives voted Monday to reject a $700 billion rescue of the financial industry. The vote against the measure was 228 to 205. With just five weeks to go before presidential and congressional elections, supporters vowed to try to bring the rescue package up for consideration again as soon as possible. Stock indexes plunged sharply on Wall Street as it appeared that the measure was going down. — International Herald Tribune

Excerpts from House speaker Pelosi’s speech. Republicans in the US House of Representatives blamed Democratic speaker Nancy Pelosi for the failed bail-out vote, claiming she made a partisan speech near the end of a debate on the rescue plan. Below are quotes from the speech: “[W]hen was the last time someone asked you for $700bn? It is a number that is staggering, but tells us only the costs of the Bush administration’s failed economic policies — policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system.” — The Guardian

Dow Plunges. As the vote progressed, the Dow steadily dropped, reaching a 700-point decline at its mid-day nadir. Television coverage of the vote was frantic, with a split-screen showing a graphic of plunging stocks paired with a chart showing the steadily growing number of ‘no’ votes. All members of the House, equipped with Blackberries, were fully aware of the market trends driven by their balloting. Almost every Representative was present during the roll call. Democratic leaders huddled with members, desperately trying to persuade defectors to change their votes. Republican leaders, in contrast, appeared resigned to the overwhelming opposition in their caucus. — Huffington Post

Delay stuns the street. On Monday morning, the passage of the financial bailout plan by the House of Representatives was expected to be merely a formality after congressional leadership reached a deal on a bill over the weekend. By the afternoon, after the measure was handed a surprising defeat, lawmakers were seemingly back at partisan loggerheads. House leaders failed to deliver the number of Republican votes many had been expected, and the measure was struck down by a score of 228 to 205. Stocks plunged on a knee-jerk panic after the $700 billion proposal was voted down, but the Street came off its worst levels by day’s end. — Forbes

Wall Street is dead. Whether it was murder or suicide is beside the point; Wall Street as it has operated for the past 75 years has been obliterated in a matter of weeks. And witnessing this violent death in broad daylight has traumatized investors everywhere. The Wall Street domino has toppled everything in sight: U.S. stocks large and small, within the financial industry and outside of it; foreign stocks; oil and other commodities; real estate investment trusts; formerly booming emerging markets like India and China. Even gold, although it has inched up lately, has lost 10% from its highs earlier this year. Not even cash seemed entirely safe, as money-market funds barely averted a “run on the bank.” — Wall Street Journal

House rejects bailout package. In a moment of historic import in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry. The vote came in stunning defiance of President Bush and Congressional leaders of both parties, who said the bailout was needed to prevent a widespread financial collapse. The vote against the measure was 228 to 205, with 133 Republicans turning against President Bush to join 95 Democrats in opposition. The bill was backed by 140 Democrats and 65 Republicans. Supporters vowed to try to bring the rescue package up again as soon as possible, perhaps late Wednesday or Thursday, but there were no definite plans to do so. A former Treasury Department official predicted that the administration would try to get another House vote before the end of the week, and with only “tiny tweaks” to the package, given the relative closeness of the vote. — New York Times

Looking for hope. Is democracy the winner here? Clearly, the people have spoken, through their elected representatives, and they’ve said no to the Paulson bailout plan. If that means a market crash, so be it. At 1,145, the S&P is now 27% off its highs, and 5.5% off where it closed on Friday — bad, but not the end of the world. But it wasn’t a stock-market crash which Paulson was trying to prevent. Rather, it was a complete seizing-up of the credit markets. Bank of America is leading the financials down, falling 15%: the no-shorting rule can’t prevent this kind of price action. And Morgan Stanley, which was rescued last time only by the promise of a bailout, is down 19% today. But many of the other big banks seem to be holding on OK, and even Morgan Stanley, at $20 a share, is still almost double the price it was trading at a couple of weeks ago. — Seeking Alpha

A shock from the house. The House voted against the bill despite the best efforts of the two candidates to be president. “This is something that all of us will swallow hard and go forward with,” John McCain had said. Barack Obama had added that “What we can’t do is do nothing.” As it stood on Monday, that was precisely what the House had chosen to do. The White House issued a statement expressing its severe disappointment and promising to get an economic team together to consider its next steps. It remains possible that the House will vote again. The Senate had been due to vote later in the week. — The Economist

House to Wall Street: Drop Dead. Many Republicans in the House were never persuaded that the credit crunch in the financial system is an impending disaster deserving of taxpayer aid. Politicians who had cut their teeth on free-market principles couldn’t accept the idea that the federal government should back up the banks who had foolishly bet everything on the housing bubble. Or they didn’t want to face the voters in six weeks and explain why a Republican would vote for the biggest government bailout ever. — Market Watch, Wall Street Journal

US stocks plunge after shock House vote against bailout. Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down the plan in mid-afternoon, and as they saw stock prices tumbling on their monitors. Activity on the floor became frenetic as the “sell” orders blew in. The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks. The selling was so intense that just 162 stocks rose on the NYSE — and 3,073 dropped. — The Independent

Why did the bail-out bill fail? It would be an extraordinary step in a democracy to ask a member of a legislature to simply reverse a vote on an issue vital to the national interest without any extra revision or debate, and the rumours may not be true. But it captures something of the mood of stunned apprehension in the House that they were believed even for a moment. In that moment, the House appeared to be absorbing, very slowly, the sheer magnitude of what it had done. Members had rejected a bill which the Treasury and the Federal Reserve had insisted was essential to the stability and viability of the American financial system — and by extension the financial system of the entire world.  — BBC News

McCain’s Share of The Blame? Sen. John McCain and his campaign believe he ought to have gotten credit — some credit — for its passage. So if McCain wanted credit for passage, should he share some of the blame for its defeat? Two thirds of half Republicans voted for its defeat…after a weekend of telephone call diplomacy from McCain. Nancy Pelosi may have given a partisan speech, but she was able to get most of her Democrats on board… — Marc Ambinder

A testament to ineptitude There could be no better testament to the historic ineptitude and failure of the Bush administration than that two-thirds of the members of the president’s own party rejected his administration’s plan to deal with the worst financial crisis since the Great Depression. It is true, House Speaker Nancy Pelosi did give a fairly partisan speech right before the vote was called, leading Minority Leader John Boehner to accuse her of alienating Republicans. But her speech could just as easily be interpreted as an attempt to stiffen the backs of unwilling Democrats — and she did deliver most of her caucus. The Republicans killed the bill, and they are going to have to live with the consequences.  — Salon 

Bailout ushers in the era of Obama. The Obama Administration began at midnight Sunday. Okay, I exaggerate. But I am trying to make a point. Which is this: Even if Sen. Barack Obama loses the presidential election — and of course he may — the playing field of our politics now has shifted seismically in his philosophical direction. The era of cowboy capitalism has died, largely of self-inflicted wounds. Who knows what’s coming now? I do: A new era of tight business regulation and government intervention in the markets. For now, and perhaps for many years, there will be no going back. — MSNBC

House bailout efforts minute by minute

11:48am PDT, September 29, 2008

11:36am: The Los Angeles Times reports that the White House lobbied Republicans right up until the vote, in an ultimately unsuccessful effort to overcome Republican objections to the bailout: “Right up until the roll call, Bush, Cheney and Paulson and industry groups called skeptical members of the president’s party. Deputy White House Press Secretary Tony Fratto said they worked one-by-one through a list of potentially recalcitrant Republicans, seeking to answer their complaints.”

11:33am: House Minority Whip Roy Blunt, the Republicans’ top vote-counter in the House, tells a news conference that he miscounted — he believed Republicans had a dozen more votes for the bailout than they really did. He blames “partisan discussion” for the failure of the bill.

11:31am: Deidre Walsh, A CNN producer who was inside the House chamber during the vote, describes the final moments before the bailout failed. Walsh reports House Speaker Nancy Pelosi shook her head, and the House fell unusually silent when the gavel came down indicating the vote was over. Walsh called it “an unbelievably extraordinary moment,” unlike anything she had ever seen on the House floor. — LA Times

Killed by malice or incompetence? Well, maybe we don’t need much of a private-sector financial system after all. That’s the conclusion that most House Republicans, and a minority of House Democrats, seem to have reached in voting down the $700 billion bailout bill on Monday. Maybe it’s best that, in a few weeks, there will be essentially two large banks left in the country, JPMorgan Chase and Citigroup. After all it has done, perhaps that’s what the financial sector deserves.  Was the bailout bill killed by malice or by incompetence? — Slate

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW