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
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a different drum 09/30/08 - 02:01 pm
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I am listening to Rush on

I am listening to Rush on WGAC -- He says the fact the stock market is going up shows people have confidence in the market -- they don't have confidence in the Government. He played a clip from Obama. Obama says if he is elected this Bailout Bill will only be the beginning -- he will do much more to fix the economy. (That's scary)

ITDoc
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ITDoc 09/30/08 - 02:05 pm
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If my suggestion to let the

If my suggestion to let the markets fail is taken: I will lose well over 75% of what I have tried to save for my retirement. I will lose 60% of my home's value. I have already lost five wonderful employees due to work slowing down and my unwilliningness to be a small business operator in a socialist country. My personal income is down about 50%. Lucky for me, my Dad taught me to always plan on only half your income when making important financial decisions. (And to pay cash whenever possible) I am willing to sacrifice all the above, if only to teach our children and grandchildren that HARD WORK is the only guarantee of success in life and to TAKE AWAY the spoils of success from those who did absolutely nothing to earn them.

a different drum
26
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a different drum 09/30/08 - 02:07 pm
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I doubt there will be any

I doubt there will be any congressional hearing on this as long as the democrats control the congress.

ITDoc
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ITDoc 09/30/08 - 02:08 pm
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The markets will recover when

The markets will recover when and only when they realize there is no bailout coming from Washington. The credit market is NOT frozen: in order to get a loan today, you must have significant downpayments and prove you can afford the monthly note. What a concept!!! This bailout is another attempt to keep the worthless voters coming to the trough long enough to elect the messiah. George "Chicken Little" Bush can't be gone soon enough. Is it too late to write in NoneOfTheAbove? NO. Write in NOTA, make the Supreme Court deal with our discontent. The US Government is no longer listening to the people. It is time to change our government.

Bizarro
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Bizarro 09/30/08 - 02:24 pm
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Tall2, I applaud your

Tall2, I applaud your attitude of saving, hard work, and living within your means. That mindset is foreign to the Dem party. Studies of millionaires indicates they have the same mindset and are frugal, buy practical instead of the most expensive, tend to have little credit and pay for things upfront, etc. We keep hearing the sky is falling but I have not heard of anyone being denied a loan for a car, house, or student loans. Do you get the feeling that this maybe a farce for their own economic gain because something else is coming down the pike unrelated to the economy. I agree it is time for a change in govt, but reform is the answer. Get rid of political parties, lobbies, the progressive tax system and the IRS.

Bizarro
13
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Bizarro 09/30/08 - 02:35 pm
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Clearly Obama doesn't believe

Clearly Obama doesn't believe in his own propaganda otherwise he would be fighting against this bailout. Further his economic plans would kill any hope of a successful economy if it does rally. Tax cuts for the top tier have not stopped this economic disaster but increasing taxes surely will only make things worst. Obama has no plans to evoke any of his economic plans because he is just playing the class warfare game for votes. Once in office watch everyones taxes go up to pay for his huge increase in govt he has stated he wants also watch the executive branch gain more powers under Obama (as he supported the FISA act because he plans to gain the power).

ITDoc
1
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ITDoc 09/30/08 - 02:37 pm
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As of 2.34pm EDT: The DJIA is

As of 2.34pm EDT: The DJIA is up over 400 points. As valuations adjust, investors with CASH are scooping up some great deals. Of course, this burns the [filtered word]es of Democrats, since their constituents don't have cash. Naturally, oil prices are going up again along with the Dow. There is no need for intervention. The market must be allowed to correct. Home ownership is not the RIGHT of the citizen, it is a privilege that must be earned.

a different drum
26
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a different drum 09/30/08 - 03:56 pm
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If congress and Bush would

If congress and Bush would take a few more days off the market might correct itself before they get back on the job and screw it up. There is a lot of real value in the stock market. I think George Bush and the Democrats caused that 700 plus drop yesterday with all the fear they were trying to instill in people to get this Bailout Bill passed.

ITDoc
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ITDoc 09/30/08 - 04:06 pm
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DJIA up 496. September is the

DJIA up 496. September is the worst month of the stock market year. ALL we need is cooler heads to reassure the country... and a new Congress to go with our new President NOTA.

a different drum
26
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a different drum 09/30/08 - 04:14 pm
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I think that our economy will

I think that our economy will be even stronger after the businesses with problem are allowed to fail or change their business practices. That is the way nature works the strong survive and the week died. I believe it is going to take 5 to 10 years to get back to where we were -- no matter what congress does. If congress takes action we may never get back -- we may not even have a free market -- it may become another branch of our government.

ITDoc
1
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ITDoc 09/30/08 - 04:22 pm
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Our way of life is on the

Our way of life is on the line here.... bailout passes, Obama gets elected, we fought WWII for absolutely NOTHING.

a different drum
26
Points
a different drum 09/30/08 - 04:25 pm
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I really don't think this

I really don't think this problem is as bad as it is made out to be -- this may be a blessing from God -- if we let the free market work! We all need to have faith. Whatever problems arise -- we can solve them. The American people have always been very creative when it comes to solving problems. The people made this country great in spite of their government. The government did not create the businesses in this country. The people did. It looks like we are all going to have to work a little harder. I don't know about you guys, but it makes me feel good when I work hard and solve my problems.

a different drum
26
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a different drum 09/30/08 - 04:31 pm
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Tall2 -- I agree with you!

Tall2 -- I agree with you!

a different drum
26
Points
a different drum 09/30/08 - 04:34 pm
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If like minded people will

If like minded people will stay on the internet trying to make the public aware of what is really going on -- there may be hope. People that depend on TV news have no idea what is going on, eps. people without cable TV news. The over the air networks are all Liberal.

a different drum
26
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a different drum 09/30/08 - 04:55 pm
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tall2 -- the way Obama is

tall2 -- the way Obama is talking on the campaign trail -- he has plans beyond the Bailout Bill for government involvement. I bet if he gets elected the stock market will drop. Main Street will look like Skid Row.

a different drum
26
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a different drum 09/30/08 - 05:02 pm
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Radio news is saying the

Radio news is saying the markets are going up because Bush says they are going to get the Bailout Bill through. I think that is a bunch of BS. According them last week the sky should have fallen by now.

ITDoc
1
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ITDoc 09/30/08 - 05:15 pm
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The scariest thing about this

The scariest thing about this election season: Even when confronted with their Messiah's own words, Obama-aid drinkers still deny facts. What facts? Get off your lazy asses and do your own research, it's the only research you'll believe anyway. Oh that's right, you need someone to lead you to the material, read it to you, and defend it. WPOS.

JesusIsComing
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JesusIsComing 09/30/08 - 05:53 pm
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The people's voice was heard

The people's voice was heard during the immigration amnesty issue in spite of President Bush and the Democratic majority in Congress backing it. We are faced with the same situation here. Hopefully, Congress will listen to Newt Gingrich's free market ideas and Congressional leaders like Bachman and Blackburn. If you have not done so, write/call/email your representatives and the President to tell them you want a free market solution.

bone
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bone 09/30/08 - 06:49 pm
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biz, i have no idea how we

biz, i have no idea how we are going to win this race on a platform of common sense and sound fiscal policy. we need to be courting media types by promoting hysteria and gov't ACTION to solve the financial crisis. only then do we stand a chance with the nonthinking voter (99% of the electorate at last tally).

a different drum
26
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a different drum 09/30/08 - 07:28 pm
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bone -- that may be true

bone -- that may be true about the non thinking public. Most people turn to the TV news and daytime talks shows to be told what to think and feel about issues. This all starts in the public school system. Most people never get a chance to get any experience thinking for them selves.

a different drum
26
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a different drum 09/30/08 - 10:10 pm
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I am watching CNN -- they

I am watching CNN -- they reported the Senate is in session and working on a bailout type of bill. They plan to vote on it tomorrow. There are a lot of things attached to it that seem unnecessary according to the reporter. I always thought bills originated in the House and went to the Senate. I guess they can do it either way.

marandan
24
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marandan 09/30/08 - 10:41 pm
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I hope the Reps hold their

I hope the Reps hold their ground. I called BROUN, CHAMBLISS, and ISSACSON and told them to vote it down. I wish everyone would get some balls and let the banks fall. Next time they will make sure they don't give out bad loans. And it would be a wake up call for All politicians, to never try to screw the TAX PAYER and then try to make us pay for it twice. I hope many of them get replaced.

a different drum
26
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a different drum 09/30/08 - 11:18 pm
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Marandan -- I think you're

Marandan -- I think you're right. If the banks fail someone will buy them and they will continue to operate. It appears to me Wall Street has bought a lot of influence in Washington, DC. I get the feeling this bill is more for Wall Street than Main Street. It appears to me like they were trying to create another branch of government with the Bailout Bill. This probably is unconstitutional. They ought to do something about getting some gasoline in Georgia.

a different drum
26
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a different drum 09/30/08 - 11:33 pm
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I was watching C-span and a

I was watching C-span and a member of the Senate was talking -- I don't remember his name. He was saying the public was outrage about this and didn't understand how important this bill was. I am thinking the public may understand this a lot better than they do as they are part of the problem. Some of those members of congress (just a few on the Banking Committee) seem to be out of touch with reality -- letting this get this bad before they did anything.

marandan
24
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marandan 09/30/08 - 11:38 pm
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The reason they want it fixed

The reason they want it fixed is so the people won't find out what a scam this has been and for how long it has been going on. That is why the Dems are pushing so publicly to do what BUSH wants. Aint that strange?

a different drum
26
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a different drum 09/30/08 - 11:53 pm
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Does anyone know if there is

Does anyone know if there is a posting on the internet that list the names of the congress members and how they voted on this bailout bill?

a different drum
26
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a different drum 09/30/08 - 11:58 pm
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Merandan -- There appears to

Merandan -- There appears to be a lot here the people don't know. I have been trying to read between the line and piece things together. I don't understand why McCain is pushing for this bill? There is a lot the members of congress are not saying. When I see these congress members talking on TV -- I get the impression they would like to say more, but are holding back.

marandan
24
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marandan 10/01/08 - 12:01 am
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Yeah I am starting to think

Yeah I am starting to think there is whole lot of scamming going on. I dont understand why the Reps aint raising hell about the whole Barney and friends pulling a ripoff like this. If I was on the right side of this, I would be calling them all out.I would be the loudest most publis sob out there. Something aint right.

a different drum
26
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a different drum 10/01/08 - 12:09 am
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The democrats are quick to

The democrats are quick to blame George Bush. I would think the republicans would confront the democrats with these issues, esp. the things Barney Frank has done. This would probably give them a good lead in the poles. I really think the democrats would be outrage if they new what the democrats had done.

marandan
24
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marandan 10/01/08 - 12:09 am
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I do know this, the sky aint

I do know this, the sky aint falling and I dont care if they ever sign the buyout or bailout what ever you call it. I say let em all fail.

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