House passes bailout
After a week of wrangling, lawmakers give final approval to historic $700 billion bailout.NEW YORK (CNNMoney.com) -- The House on Friday passed a far-reaching and historic plan to bail out the nation's financial system.
The vote for passage of the Senate-amended bill - 263 to 171 - was the result of strong lobbying on the part of the White House and other supporters of the bill all week, following the House defeat of a similar measure on Monday - a defeat that shocked the markets and congressional leaders on both sides of the aisle.
According to preliminary numbers, 172 Democrats voted in favor of the bill while 62 opposed it; and 91 Republicans voted for it and 108 voted against it.
Republicans who said they would switch their votes from "no" to "yes" included Rep. Howard Cobble, R-N.C., and Rep. Sue Myrick, R-N.C. In a statement, Myrick said, "We're on the cusp of a complete catastrophic credit meltdown. There is no liquidity in the market. We are out of time. Either you believe that fact, or you don't. I do."
Democrats who said they would switch their votes include Rep. John Lewis, D-Ga., Rep. Elijah Cummings, D-Md., and Rep. Donna Edwards, D-Md.
Cummings noted this was the most difficult vote for him in his 12 years in Congress. "But today we must step up and lead," he said.
Earlier this week, Cummings and Edwards were part of a group that had been working on an alternate proposal. The lawmakers had lobbied strongly but unsuccessfully to include, among other things, a change to the bankruptcy law that would let judges modify mortgages on primary residences, a move the lending industry has strongly opposed.
Cummings and Edwards said they had received calls from Democratic presidential nominee Barack Obama, encouraging them to change their minds. They said they received assurances that he was committed to the bankruptcy provision.
House Minority Whip Roy Blunt, R-Mo., told reporters before the vote on Friday morning that three things have happened to change some Republican members' opposition to the bill since the House defeated the measure on Monday: more calls to their district offices in support of the bill; a clarification of SEC accounting rules regarding mark-to-market accounting; and the additions the Senate made to the bill, which it passed on Wednesday, including a number of tax break extenders and an increase in FDIC deposit insurance coverage. (What's in the bill.)
The House debate began on the heels of two market-moving events: a worse-than-expected monthly jobs number; and a surprise merger announcement between Wachovia and Wells Fargo.
The legislation, which would allow the Treasury Secretary to purchase as much as $700 billion in troubled assets in a bid to kick-start lending, would usher in one of the most far-reaching interventions in the economy since the Great Depression.
For the past two weeks, lending between banks and between banks and businesses has gotten considerably more expensive. Small businesses are having trouble getting loans. As of midday Friday, one key measure showed that banks were hoarding cash rather than loaning it. Meanwhile, an indicator showing how willing banks are to lend each other was at an all-time high.
Advocates say the plan is crucial to government efforts to attack a credit crisis that threatens the economy and would free up banks to lend more. Opponents say it rewards bad decisions by Wall Street, puts taxpayers at risk and fails to address the real economic problems facing Americans.
Lawmakers who said on Friday they planned to vote against the bill warned that "being stampeded" into voting the bill through would be a serious mistake.
"Wall Street is so hungry for the $700 billion they can taste it. To get it they need to ... create panic, block alternatives and herd the cattle. We ask Congress not to rush. Defeating this bill today isn't the last step. It's the first step in passing a good bill," said Rep. Brad Sherman, D-Calif.
Rep. Marcy Kaptur, D-Ohio, who has called for the FDIC and SEC to use their powers to ease the credit crisis, said soon before the vote, "Pray for our Republic. She's being placed in ... very greedy hands."
Lawmakers who stood in support of the bill noted that it will help Main Street, not Wall Street. "We [would] rescue the jobs, the savings and the ability to get a loan for each hard-working American," said Rep. Louise Slaughter, D-N.Y.
Rep. Maxine Waters, D-Calif., noted that the bill also supports homeowners at risk of foreclosure by giving the government more say in how loans for troubled borrowers are modified so people can stay in their homes.
"When we buy up this toxic paper, we're in charge. We can do the kind of loan modifications we've been urging [the industry coalition] Hope Now to get done. ... We'll be able to set some standards," Waters said during the floor debate. "For anybody who says there's nothing in this bill for homeowners, they're incorrect."