One day after a stunning defeat of a financial bailout proposal rocked global financial markets, lawmakers suggested that the Senate would take up the debate on the proposed bailout as early as Tuesday in an effort to tweak the proposal and put pressure on House members. The effort by lawmakers to salvage the bill comes after members of the House sent the bill to defeat during a key Monday vote, by a 228-205 margin; U.S. stock markets endured one of their worst single day of losses, as a result.
Stocks rebounded Tuesday morning as investors put their hope in a revised bailout proposal; in early trading Tuesday, the Dow Jones Industrial average rose 227 points to 10,592.68, when this story was published. Despite investor optimism, however, the future of a $700 billion bailout package remained largely in doubt, despite renewed lobbying on Capitol Hill from Bush administration officials to reconsider.
While House Republicans have remained largely and steadfastly opposed to the proposal, and have pushed a separate proposal akin to Federal mortgage insurance on the values of both whole loans and troubled securities, it was a revolt by rank-and-file Democrats in Monday's vote that perhaps proves the deep-seated concerns lawmakers have about passing a bill so widely opposed by their consituencies. Various sources at Congressional offices have told HW in recent days that feedback streaming into representatives' offices has been "overwhelmingly" negative.
"We're running 20 to 1 against," one staffer told HW, who asked not to be identified by name or office, ahead of the vote. Ninety-five of the 235 votes cast by Democrats on the bailout were ultimately cast against it.
Rep. Carol Shea-Porter (D-NH) told the Wall Street Journal
that she saw the bailout proposal as a request to "give up [Congress'] constitutional power of the purse and hand over a blank check for $700 billion. Congress said no."
The Journal story also took a close look at the Democratic and GOP factions that both opposed and supported the bill, and found that those House members facing tough re-election battles almost overwhelming voted against the proposed bailout.
Christopher Dodd (D-CT), chairman of the Senate Banking Committee
, suggested to members of the press on Monday that the Senate may take up the bailout proposal as early as today; his remarks came after Democratic presidential candidate Barack Obama (D-IL) and Senate Budget Committee ranking member Judd Gregg (R-NH) suggested some form of deal would eventually pass.
Which had investors taking at least some heart; but our sources suggest that any passage of the bill yet faces a steep battle irrespective of an outcome in the Senate. A report at the Politico suggested Monday evening that former FDIC chairman William Isaac has been on Capitol Hill
this past week educating lawmakers on the options and tools available to the Treasury; Isaac has reportedly been a strong opponent of the bailout proposal.
A separate report by the G7 Group
on Monday reported that Issac, along with economist James Galbraith, has strongly recommended letting the FDIC do its job, along with canceling mark-to-market accounting standards.
A bank manager that spoke with HW on Monday suggested that the bailout was a knee-jerk reaction by Bush administration officials, and "the result of federal panic at the unexpected effects of Lehman’s collapse."
Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.