It’s not over.
That’s the message lawmakers are sending to Wall Street and Main Street after the stunning defeat of a $700 billion financial rescue plan this week.
But to get there, they’ll need a plan that both meets the need on Wall Street and can also win a majority of House members, who face voters in little more than a month from now.
Leaders in Congress on both sides of the aisle say this can be done.
For Democrats, it will take tweaks to the core plan that address more of the needs on Main Street, including more stimulus for the economy. For Republicans, it will take more protection for taxpayers and, if possible, more free-market elements in the plan.
“That’s not just Wall Street. It’s the pensions of people who are retired and worked for city and county government,” said Senate majority leader Harry Reid, as he opened the Senate on Tuesday. “We’re all committed to keep this rescue package moving forward.”
Meanwhile, outside finance experts are lining up to urge lawmakers to also revise the Wall Street face of the plan.
Rejecting appeals from their party leaders, 228 House members – 133 Republicans and 95 Democrats – voted to derail the plan, which failed by 12 votes, 204-228.
Republican leaders, who had predicted a tough vote, lost most conservatives, wary of a big-government takeover, along with many moderates facing close races in November.
On the eve of the vote, House Speaker Nancy Pelosi insisted that Republicans deliver a majority of their caucus, or 100 votes, to show the American people that the historic vote was bipartisan. In the end, they could produce only about a third of the caucus.
Democrats, who have produced lock-step majority votes on important issues for most of the 110th Congress, lost most of their black and Hispanic members, riled that the plan didn’t help enough homeowners facing foreclosure; and also lost many of the 29 votes in the Progressive Caucus and 22 in the fiscally conservative Blue Dog caucus.
News of the House vote sent stock values plunging some $1.3 trillion in paper value after the vote. The record 778 point drop of the Dow Jones industrial average got Congress’s attention. After the vote, negotiators on both sides of the aisle repeated the need to convince voters that the rescue plan isn’t just a “bailout” for Wall Street, but also essential for Main Street. But they add that it will take more than better public relations to move the bill to the Senate and the president’s desk.
Democrats say that the burden of finding those additional votes must fall on Republicans: It’s a Republican administration, more Republicans must back it. But leaders are also preparing language that will deliver more relief to homeowners. Many on the left wing of the party are mining outside experts for alternatives to the plan negotiated with Treasury Secretary Henry Paulson – and are urging party leaders to hold out for more.
“This Congress must step up to its constitutional responsibilities to craft that right deal, not an insider trade,” says Rep. Marcy Kaptur (D) of Ohio, who opposes $700 billion in government purchases of “troubled assets” on the books of US and foreign financial institutions.
The financial crisis in the 1980s was resolved “in a much more disciplined and rigorous way than taxpayers printing money for Wall Street,” she adds, referring to actions by the FDIC to resolve thousands of problem situations with no cash changing hands.
Meanwhile, Republicans face a tougher task of bringing on board conservatives convinced that the Paulson plan is a step toward socialism. “I’m resolute in my opposition,” said Rep. Darrell Issa (R) of California. “Today we are ending the Reagan era if we vote for this, and we can’t come back and fix it next year.”
“Unless the market drops substantially, the Republicans aren’t going to get scared enough to do the right thing. At this point, they’re listening to talk radio and not listening to the president,” said Rep. James Moran (D) of Virginia, after the vote.
He and other Democrats cite contacts with outside experts, such as financier George Soros, as advisers for the next steps forward. “I just talked to George Soros on the phone. He’s coming up with a bill,” Mr. Moran said.
A report released Monday by the nonpartisan Center for Responsive Politics signals another dimension to the calculus of support on a Wall Street rescue plan: Members who voted for the $700 billion plan received 51 percent more in campaign contributions from the finance, insurance and real estate sector over their congressional careers than those who opposed it.
Since 1989, the finance, insurance, and real estate sector has given more than $2 billion to federal candidates and parties, more than $68 million to House members in this campaign cycle.