Why Did Lawmakers Shift On Bailout? Fear

The House on Friday passed a modified version of the $700 billion Wall Street bailout bill which it had rejected on Monday. What changed their minds? In a word: fear, says New York Times business columnist Joe Nocera.

Copyright © 2008 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

SCOTT SIMON, host:

New York Times business columnist Joe Nocera, Weekend Edition's Joe Nocera too, was also at the House hearings yesterday. He's back in New York, joins us now from the studios of the Radio Foundation. Joe, thanks for being with us.

JOE NOCERA: Thanks for having me, Scott.

SIMON: So, what changed so many minds on both sides of the aisle?

NOCERA: One word: fear. Yeah, you know, Wall Street - the contagion of fear that has swept Wall Street over the last month hit Main Street on Monday after this was voted down. And that in turn caused the fear to hit Congress. It's really that simple. They were so afraid that if they didn't do anything the economy might collapse, that they just sort of said, you know, I'm going to hold my nose and vote for this.

SIMON: There were some changes, though, weren't there, between the bill they voted on Monday and what they voted on yesterday? What were they?

NOCERA: Yes. I mean, they were primarily tax breaks, many of which everybody is more or less in agreement with. The problem is that, you know, they haven't had, as they call it in the trade, offsets, i.e. they haven't found spending cuts to make up for them. And this was done primarily to get massive Senate support to really show, you know, that's the way it works.

Barney Frank had a wonderful line after it was all over, when people were saying, well, what about all the pork? He said, you know, if you don't want politics in this process, you really shouldn't be handing it over to 535 politicians to vote on. So, you know, that's sort of an inevitable consequence. You know, they see a bill that has to pass. Of course, they're going to throw junk on it and lard it up.

SIMON: And speaking of that process and putting the muscle in, you know, you're inevitably intrigued. We just heard Zach Wamp, a conservative Republican from Tennessee, who changed his mind. Jesse Jackson Jr. and Bobby Rush of Illinois voted against it on Monday. They are liberal to very liberal Democrats. They voted for it yesterday. What forces were at play, aside from the fear that you mentioned, but political forces we recognize in New York, Washington, Chicago, Tennessee, elsewhere that might have helped focus their minds?

NOCERA: Well, you know, Zach Wamp actually said in his speech, the pension funds of Tennessee are upside down. So, I mean, his constituents were calling him saying, you know, you've got to pass this thing or we have terrible problems. California was worried about rolling over its commercial paper. You don't think that had an effect? But there's two people I want to quickly mention. One is Warren Buffett who publicly supported the bill and said it could be a good deal for the government. And there's a lot of congressmen who were influenced by that because they thought if Warren Buffett thinks it's good, then I'm going to vote for it.

SIMON: And he didn't just talk the talk, he was lighting billions of dollars...

NOCERA: He walked the walk.

SIMON: Yeah.

NOCERA: That's right. He walked the walk. He made big investments in General Electric and Goldman Sachs. Both times he said, I think this bill will pass and it'll be good for America. The second person is Barack Obama. Unlike John McCain who made that public spectacle of himself by suspending his campaign to, quote, unquote, "fix the bill," and then did nothing, Barack Obama actually worked the phones between Monday and Friday and really changed a lot of minds in the Congressional Black Caucus which was largely opposed to the bill on Monday.

SIMON: Yeah. Joe, of course the big questions are ahead, aren't they?

NOCERA: Yes they are. You know, how is Treasury going to buy these securities? What kind of deal are they going to get? Are they going to be able to make money on them? And the most important, most potent, most profound question of all, will it work? The big problem for everybody is we don't know. All we can do now, Scott, is hope.

SIMON: Joe Nocera writes the "Talking Business" column for The New York Times. Nice talking to you, Joe.

NOCERA: Thanks, Scott.

Copyright © 2008 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.