House votes down $700 billion bailout

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WASHINGTON --- The economy has endured hurricanes, soaring fuel and food prices, falling home values and a growing credit crisis. Can it now survive Congress?

The House's stunning defeat of a $700 billion package urgently championed by President Bush, sent shock waves through Capitol Hill, the trading floors on Wall Street and the Oval Office on Monday.

"An economic 9-11," warned Terry Connelly, dean of Golden Gate University's Ageno School of Business, of the potential fallout. As the package went down, panicked investors caused the Dow Jones industrials to nosedive nearly 780 points in their largest one-day point drop ever.

Lawmakers defeated the bill by a 228-205 vote, but Democratic and Republicans leaders and Treasury Secretary Henry Paulson pledged to keep working for a deal acceptable to all sides.

In the meantime, the economic wreckage that the administration and Congress have warned about -- rising unemployment, shrinking nest eggs and prolonged recession -- might not happen immediately, but that doesn't mean it won't.

"This is like the advice you get from the doctor who says you should quit smoking," said Robert Brusca, chief economist at Fact and Opinion Economics in New York. "You know he's right. But if you don't, you're not going to die tomorrow and you're not going to die next week. But at some time, it's probably going to get you."

For now, Treasury was expected to work with other government agencies, including the Federal Reserve and the Federal Deposit Insurance Corp., to deal with problems on a case-by-case basis.

There are some steps the Federal Reserve can take to cushion damage from the worst credit crisis since the Great Depression.

The Fed, which has been providing billions in short-term loans to help banks overcome credit stresses, could keep expanding those loans in an effort to spur financial institutions to lend more freely again. And, it could keep working with other central banks to inject billions into troubled financial markets overseas.

Also, the Fed could make it easier for banks and investment firms to draw emergency loans from the central bank by expanding the type of collateral they pledge to back those loans.

And, if the credit crisis were to turn even worse, the Fed also has the power in extreme circumstances to expand emergency lending to other types of companies and even to individuals if they are unable to secure adequate credit from other banking institutions.

The Fed also could do an about-face and start cutting its key interest rate again. The Fed in June halted an aggressive rate-cutting campaign and has kept its key rate since at 2 percent.

While some Fed officials doubt that another rate reduction would do much to persuade banks to begin lending again, Brian Bethune, economist at Global Insight, insists a deep cut would pack a powerful punch. It would lower the prime lending rate, now at 5 percent, that serves as a benchmark for credit card rates and many other types of loans.

Even if the bailout were enacted by Congress and actually worked, many predicted the economy will probably shrink in the final quarter of this year and in the first quarter of next year, meeting the definition of a recession. If Congress doesn't act, analysts, who were downgrading their economic forecasts, believe those contractions will be deeper.

The unemployment rate -- now at a five-year high of 6.1 percent -- is expected to hit 7 or 7.5 percent by late 2009, which would be the highest since after the 1990-91 recession. Some economists say the rate could rise even more.

More banks could fail, too. In the second quarter that ended in June, the Federal Deposit Insurance Corp. estimated 117 banks and thrifts were in trouble, the most since 2003. The threat of more banks failing forced the government to act swiftly.

The bailout plan was intended to revive banks on Wall Street and Main Street by buying billions of their worst mortgage-related assets so that lending, the oxygen of the American economy, would flow freely again.

"People are going to go home and look at their 401(k)'s and not be very happy, and these are not just people from New York, but Iowa and everywhere else. This bill is meant for everyone -- not just Wall Street but Main Street," said New York Stock Exchange floor trader Theodore Weisberg.

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a different drum
26
Points
a different drum 09/30/08 - 01:24 am
0
0
TIME TO SWEEP THE HOUSE --

TIME TO SWEEP THE HOUSE -- Lets sweep the House of Representative clean of as many of these Representatives that put the needs of Wall Street before that of your FREEDOM. Lets get rid of these people that voted YES to this ridicules Bailout Bill. Let's keep the people that were brave enough to stand up against the powerful special interest groups and said NO! Barney Frank should be the first to go.

a different drum
26
Points
a different drum 09/30/08 - 01:33 am
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0
This was about Wall Street.

This was about Wall Street. The president said credit was frozen. Credit is not frozen to people that have good credit and a down payment. This problem was all about banks loaning money to people that couldn't afford to pay it back. Was this 700 Billion all about giving money to banks so they could start back lending money to people that can not afford to pay it back?

a different drum
26
Points
a different drum 09/30/08 - 01:49 am
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0
I do have a lot of RESPECT

I do have a lot of RESPECT for the Representatives that listen to the American people and stood up for our freedom both Democrats and Republicans. We all need to continue to stand with these people to protect our freedom. I am sure they are under a lot of pressure from special interest groups.

a different drum
26
Points
a different drum 09/30/08 - 01:59 am
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0
It is my opinion the 228 that

It is my opinion the 228 that voted YES were probably under a lot of pressure from Wall Street contributors to their campaign fund. If they were concerned about the American people they would have fixed the problem before it got to this point -- it is my understand this problem was common knowledge in Congress.

a different drum
26
Points
a different drum 09/30/08 - 02:07 am
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0
We should just let the free

We should just let the free market do its job and let the chips fall where they may. Perhaps Congress could change the laws to make the system work better, but I don't think they should spend a penny of taxpayer's money.

a different drum
26
Points
a different drum 09/30/08 - 02:21 am
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Congress wants to pass this

Congress wants to pass this law so McDonalds can borrow money and expand -- in my opinion we have too many McDonalds as we do with houses. They keep going we will have to Bailout McDonalds because of over growth. Let the free market do it's job.

a different drum
26
Points
a different drum 09/30/08 - 02:28 am
0
0
Congress says we have 5 major

Congress says we have 5 major banks closing -- good. Let's get back to small locally own banks again or better yet -- put the money in your mattress. You would be amazed how comfortable you can sleep on a lumpy mattress full of money.

marandan
24
Points
marandan 09/30/08 - 03:58 am
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0
BTurner, I completely agree

BTurner, I completely agree with you on this matter. I also think we should let all the lenders squirm, an dmaybe they will think twice before making high risk loans. They should know there are consequences for your actions.

marandan
24
Points
marandan 09/30/08 - 04:07 am
0
0
You cant loan money to people

You cant loan money to people who cant pay it back. Change the laws, and make the peop;e in leadership positions pay back All they have frauded the taxpayers out of, and send them to prison.

GnipGnop
12744
Points
GnipGnop 09/30/08 - 04:49 am
0
0
What if you are threatened if

What if you are threatened if you don't relax your rules and loan it? Don't put this all on the lenders. This is a political fallout and nothing more. Blame goes to both parties. Any politician that ties his vote to fear of reelection should be thrown out of office. We elected you to serve the people. Do your job!!! What will you say when there are soup lines like there were in the great depression?

marandan
24
Points
marandan 09/30/08 - 05:05 am
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0
I will say if people would

I will say if people would have honored their word to pay their own bills, we would not be in soup lines. Those of us that pay our bills must now suffer for those who didnt. I expect my leaders to do their job, which does not include forcing more taxes on me that I personally did not cause. We must not reward or come to the rescue of businesses with poor business practices. Now people feel what repricussions can happen when we try to force our lenders to give loans to people without properly qualifying them. I want leadership to take their time and ensure that this new bill is done slowly and properly. By taking their time I believe it will instill in people how being careful with the taxpayers money, should our leaders FIRST priority. Regulation of these lenders does not take BIG government, it takes HONEST people.

marandan
24
Points
marandan 09/30/08 - 05:21 am
0
0
We put people in charge of

We put people in charge of overseeing these enterprises, and what happened? We were ripped off. And now some of them have the nerve to say"The President didn;t watch us close enough". Man, That is pathetic and unacceptable. These are lawyers, and supposedly smart men. Are we to believe they were incompitent? I dont think so. They knowingly and willingly exploited the system, for monetary benefit of themselves and others. They also misled and obstructed any attempt to regulate the system. That being said, I beleive there were people on both sides that had their hands in this, but the majority, THE MAJORITY of those responsible, and allowed this to happen, were Democrats. I hope they are publicly prosecuted, fined and imprisoned. And if the DEMS say they committed all this fraud because they weren't being watched properly, I say, NEVER put them in charge of handling any other committee, because they have proven to be crooks, everytime they have the chance.

marandan
24
Points
marandan 09/30/08 - 05:37 am
0
0
What lenders were threatened?

What lenders were threatened? How? What can be done to them? F/M and F/M would not do business with them? Maybe that would have saved us from the situation we find ourselves in now. Everyone can't have everything. Everyone has to live according to their means. Just because I could put a down payment on a Bentley, doesn't mean I could afford to buy one.I think ALL people should be accountable for their own promises(contractual). How can you possibly think it is ok for someone to renig on their responsibilities? If we bailout these lenders, when will it stop? Who will be next airlines, Automakers, Trucking? That is the problem with socialism: If everyone wants a bailout, who will pay for it. You can't fix everyones problems. Let us all realize how serious this problem can be. Imagine if everyone wanted a bailout, how would we decide who to help? Socialism takes away ACCOUNTABILITY. WAKE UP, this is serious people.

Reality
3
Points
Reality 09/30/08 - 05:53 am
0
0
It doesn't really matter how

It doesn't really matter how it is handled, the ones who pay their bills and have invested in their retirement funds will get screwed...The ones who don't have anything to lose, not even welfare will scream the loudest. Thank the democrats that said everyone should own a home and let welfare money be claimed as income. They were saying you would be racist if you don't loan money to these dregs of society...

marandan
24
Points
marandan 09/30/08 - 06:04 am
0
0
absolutely!!!!!!!

absolutely!!!!!!!

shivas
2
Points
shivas 09/30/08 - 06:06 am
0
0
This bill will pass, and

This bill will pass, and Democrats will be shown as the leaders that got it done and did not play politics. Obama is looking very presidential, while McCain is beginning to look old and bitter.

marandan
24
Points
marandan 09/30/08 - 06:10 am
0
0
Shivas, the DEMS could have

Shivas, the DEMS could have passed it by themselves, BUT THEY DIDNT. WHY?

marandan
24
Points
marandan 09/30/08 - 06:18 am
0
0
Cant hear ya Shivas, uhm,

Cant hear ya Shivas, uhm, uhhhh, uhm, mmmm, uhhhhhh, wait a minute I can't hear myself.

r11mcbell
0
Points
r11mcbell 09/30/08 - 07:14 am
0
0
People are actually bailing

People are actually bailing out themselves. In the final analysis wall street is the american people. Those which had an equity base have been purchased or closed at a tremendous loss to their investors and owners. Yesterday, there was one trillion in 401ks was lost. When they pass this survival bill, not a bail out, the funds will eventually recover.
You are correct when you say we are lending to people who are not credit worthy. We should go back to the concrete standards and not let politians influence who gets a loan.

Little Lamb
49247
Points
Little Lamb 09/30/08 - 07:23 am
0
0
We owe a debt of gratitude to

We owe a debt of gratitude to the courageous Democratic and Republican representatives that gave us some breathing room by voting NO on this bailout bill. But we do not have MUCH breathing room. I urge you to contact your representative AND ESPECIALLY YOUR SENATORS and urge them to kill ANY bailout legislation. The free market will restore order to our banking system much more reliably and fairly than will government meddling, with its favoritism and heavy-handedness. Don't let Shivas' prediction come true!

paulwehitherspoons
0
Points
paulwehitherspoons 09/30/08 - 07:25 am
0
0
Shivet, how many democrats

Shivet, how many democrats voted against the bill? Can you tell me again, I forgot?

justthefacts
25478
Points
justthefacts 09/30/08 - 07:41 am
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0
Shivas, funny. Everyday he

Shivas, funny. Everyday he makes stupid uninformed remarks and then hightails it. maramda, read up a little. The banks were pressured to make high risks mortgages.

No_Longer_Amazed
5146
Points
No_Longer_Amazed 09/30/08 - 07:49 am
0
0
I seem to agree with all the

I seem to agree with all the comments except the one by shivas @ 7:06 AM. When Wall Street was making money I didn't receive a share of the profits, so why should I be expected to pay a share of the losses? Shareholders invested and reaped the financial rewards when their investments paid off, so why should I be expected to bail them out when their investments lost? I say let the system work, isn't that what capitalism is all about?

gnx
7
Points
gnx 09/30/08 - 07:50 am
0
0
Kudos to the representatives

Kudos to the representatives wise enough to see through this sham of a bill and vote no to it. The markets will eventually rally on their own and those who are truly credit worthy will still be able to obtain credit. Those who have been living large on very little will now have to learn how to live within their means like the rest of us have been doing for years.

shivas
2
Points
shivas 09/30/08 - 07:52 am
0
0
Thursday the bill will pass,

Thursday the bill will pass, and Democrats will be seen as the leaders who got it done. It may be that Thursday, all Democrats will be forced to pass it through without the help of cowardly Republicans. Please excuse my delay in posting as I take my children to school, and then start work. It may be awhile before you hear from me again as I do have meetings this am. Justthefacts, your name belies the fact all you state are opinions. I am glad you and a few others have all day to play on blogs, Probably living off the dole.

marandan
24
Points
marandan 09/30/08 - 08:01 am
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0
Pressured or what? They DON'T

Pressured or what? They DON'T have to do risky business. We are All in business to make money, not lose it. A poor business decision on my part, will not be financially backed by any of you on my behalf. Good sound business decisions result in profits, poor ones should not be bailed out or rewarded. I am not ignorant to what happened, I am saying why did the banks comply, with a high risk loan they didn't have to? And Now WE MUST bail em out. I say NO, Let them fail and be mad as they want at the DO GOODERS who thought they could force equality. The mistake the lenders and the do gooders made was to TRUST that the people they loaned to, would not honor the contract they promised to. Those people kew their risk when agreed to buy the house, or will you say they again didnt know what they were doing? If that is the case, why should these incompitent people have the right to vote for our PRESIDENT. At some time, we must hold people accountable for their actions. Until then, DONT ask ME to pay for their MISTAKES.

sjgraci
2
Points
sjgraci 09/30/08 - 08:04 am
0
0
There are a lot of very

There are a lot of very stupid people in this country. Has anyone looked at their 401Ks at the end of yesterday's trading. Everyone of mine is at its 52 week low. In the past couple of weeks I lost over 30 grand. I got time so I'm not freaking out but this is just the tip of the iceburg. When people start getting denied credit to finance that nice new LCD TV they're eyeing in the big box store, people are denied car and home loans, businesses are denied short term loans to meet payroll and people start losing their jobs as a result, maybe the idiots will finally wake up. This whole thing is a failure of leadership and the failure of CONServative laissez faire economic policies. The President did a horrible job explaining to the people why this bill was neccesary to not only save Wall Street but more importantly Main Street. He was AWOL once again. The Repiblican leadership, including McSame, did even a worse job whipping the lunatic CONServative caucas on board to support a BIPARTISAN bill. Those on the far left hated it because it did not do enough for Main Street. The far Right did not vote for it because it did not deregulate or lower taxes: The Very Reasons We Are In This MESS

justthefacts
25478
Points
justthefacts 09/30/08 - 08:08 am
0
0
Not living off the dole ole

Not living off the dole ole Shivas. Sitting in the Crown Room in San Diego waiting on my flight. Played Torrey Pines yesterday, nice track. Again, the Democrats could have passed it yesterday. Why not, with all that leadership and stuff.

Bizarro
13
Points
Bizarro 09/30/08 - 08:12 am
0
0
I think both parties will be

I think both parties will be revealed as partisan. The attempt by the Dems to include funds for ACORN is beyond an abomination. I also think that since Pelosi specifically asked certain Dems not to support the bill that she knew this would fail and that was her strategy (as was her vitriol accusations a ploy). I find it paradoxical that 99% of folks disagree with this bill, but then there is anger the bill has not been passed???? The Rep would be wise to let the Dem pass the bill without any support, then when Obama wins and employs his economic plan and the economy will inevitably collapse directly from his actions, then the Dems get all the blame. It would highlight how Dems always think throwing money at a problem is a solution, and make Rep look like they have returned to fiscal restraint (which they lost).

reader54
329
Points
reader54 09/30/08 - 08:13 am
0
0
Marandan, the Dems.delivered

Marandan, the Dems.delivered their vote but the GOP didn't ! Check out the PERCENTAGE of each parties vote and it will reflect that fact. Sure,the Dems.could have passed it alone;then castigated as the ones responsible for the bailout ! Politics as usual.

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