WASHINGTON – Stocks took a nosedive on Wall Street Monday afternoon after the House balked at proposed $700 billion bailout plan negotiated by the Bush administration and congressional leaders to stabilize the nation’s financial services industry by voting down the legislation by 205 to 228.
Among New York’s 29 House lawmakers, a trio of upstate lawmakers helped defeat the bill — Democratic Reps. Kirsten Gillibrand of Hudson and Maurice Hinchey of Hurley, along with Republican Randy Kuhl of Hammondsport.
Despite revisions made over the weekend to mollify House Republicans who prefer an insurance approach instead of direct government spending, members of the GOP voted by a two-to-one margin against the plan, 133 to 65.
(Above: House Speaker Nancy Pelosi, right, D-Calif., is seen leaving a news conference at the Capitol on Sunday with Senate Banking Committee Chairman Chris Dodd, D-Conn.)
And although Democrats voted in support of the bailout by a two-to-one margin – 140 to 65 – it wasn’t enough for passage.
Democratic Rep. David Obey of Wisconsin blamed President Bush and Republican presidential candidate John McCain for the defeat because they failed to deliver sufficient votes from members of their own party. “It is incredibly reckless on their part,” he said.
House leaders (can bring the bill back to the floor later this week for another vote, presumably after convincing at least 13 “no” voters to switch or by making further changes to the bill to pick up support.
The bill had changed drastically from the Treasury Department’s three-page proposal made a little more than a week ago.
The 110-page legislation would have added oversight from Congress and two agencies, provided the $700 billion in increments rather than all at once and given the government some stock in companies that participate in the program.
Bush administration officials worked with congressional leaders over the weekend to reach an agreement that would have allowed banks and financial institutions to sell off some bad mortgage-related assets so they could continue to make loans to U.S. businesses. Backers of the plan expected the government to resell these assets in a few years once the market improved so taxpayers would lose only a fraction of the $700 billion.
Many opponents said the massive government intervention into the private financial markets wouldn’t stop home foreclosures or help the economy.
“Economic freedom means the freedom to succeed and the freedom to fail,” Rep. Mike Pence, R-Ind., said. “The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy.”