Bailout Fails; Leaders Vow To Try Again

The drama on Capitol Hill Monday reverberated on Wall Street and in financial markets around the world. The House rejected the proposed $700 billion rescue plan for Wall Street despite pleas from President Bush, Treasury Secretary Henry Paulson and congressional leaders. Lawmakers will be back later this week to try again.

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STEVE INSKEEP, host:

It's Morning Edition from NPR News. I'm Steve Inskeep. Good morning. Today is another day. Treasury Secretary Henry Paulson says he cannot protect the economy without the financial bailout that failed in the House yesterday.

Secretary HENRY PAULSON (U.S. Treasury): Therefore, I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people, by limiting the prospects of further deterioration in our economy.

INSKEEP: You could see that deterioration yesterday by watching two numbers. One was the vote count in Congress. The other was the Dow Jones Industrial Average. It may be no coincidence that as the votes came up short, the Dow went down. NPR's Brian Naylor has the story.

BRIAN NAYLOR: Lawmakers had been warning since the Treasury Secretary proposed his original plan that their constituents objected to the massive bailout. Still, after days of negotiations and a rarely unified congressional leadership in support for the plan, the outcome yesterday came as something of a shock. And the finger pointing began immediately. For Republicans the blame belonged to Speaker Nancy Pelosi, who blasted the Bush administration in her speech in support of the bailout.

Representative NANCY PELOSI (Democrat, California; Speaker of the House): They claim to be free market advocates when it's really an anything goes mentality. No regulation. No supervision. No discipline.

NAYLOR: Afterwards, Virginia Republican Eric Cantor held up a copy of Pelosi's remarks.

Representative ERIC CANTOR (Republican, Virginia): Right is the reason I believe why this vote failed. And this is Speaker Pelosi's speech that frankly struck the tone of partisanship that frankly was inappropriate in this discussion.

NAYLOR: Republicans said a dozen of their members who had committed to supporting the bailout voted no after hearing Pelosi's speech. The often acerbic Massachusetts Democrat Barney Frank ridiculed that claim.

Representative BARNEY FRANK (Democrat, Massachusetts): Give me those 12 peoples' names and I will go talk uncharacteristically nicely to them.

(Soundbite of laughter)

Rep. FRANK: And them tell what wonderful people they are, and maybe they'll now think about the country.

NAYLOR: But members on both sides of the aisle pointed to plenty of ideological and political reasons for voting no yesterday. They said taxpayers were being asked to pay for the mistakes of Wall Street. That their constituents were overwhelmingly telling them to vote no. That the Treasury was given too much power. Here's Texas Republican John Culberson.

Representative JOHN CULBERSON (Republican, Texas): This Secretary of the Treasury is being given authority absolutely unprecedented in the history of this nation. We're essentially creating a King Henry here who is going to be able to buy any type of financial instrument he wants from any financial institution anywhere in the world.

NAYLOR: Backers of the measure said the consequences for rejecting it would be dire. Massachusetts Democrat Edward Markey said taxpayers would feel even more pain if the bailout weren't approved.

Representative EDWARD MARKEY (Democrat, Massachusetts): If we don't act now, we won't just punish Wall Street but punish innocent people on Main Street who will get cleaned out.

NAYLOR: That predictions seemed to be borne out by the stock market, which dropped sharply as the votes were being counted on the House floor and it become clear the measure would not pass. Afterwards, Democratic Senator Chris Dodd of Connecticut said the most important numbers yesterday were not Congress's votes but the stock market's losses.

Senator CHRIS DODD (Democrat, Connecticut): Those are the numbers that I think are critical. This was not a failure of a bill today. This is a failure of will, which is regrettable.

NAYLOR: His view was echoed by Republican Senator Judd Gregg of New Hampshire.

Senator JUDD GREGG (Republican, New Hampshire): If we don't act promptly around here, and effectively, then a lot of people are going to lose their jobs. And Main Street is going to be put into dire straits.

NAYLOR: The way forward is not exactly clear. Congress will return to session on Thursday after Rosh Hashanah. Leaders could call for a second vote on the bill in hopes that 12 lawmakers who opposed it yesterday will have a change of heart after seeing the impact of their action on the markets. Otherwise, it's back to the negotiating table. Brian Naylor, NPR News, the Capitol.

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