What Happened... Part I

Words: Michael SchmerbeckOn Monday, September 29, 2008, the House of Representatives failed to pass H.R. 3997, the Emergency Economic Stabilization Act, by a margin of 205-228. 140 Democrats voted for the package, along with 65 Republicans. 95 Democrats voted no, as did 133 Republicans. One Republican did not vote. The defeat of the bill was stunning, and the Hill seemed to be at a loss on how to react.

The markets did react following the vote. The Dow Jones Industrial Average (DJIA) was down nearly 778 points (about 7%) at the close, the S&P500 Index was down almost 106 points (8.7%), and the NASDAQ Composite Index was down almost 200 points (9%).

The markets continue to fluctuate, and even shoot upwards today, although it remains to be seen what long-term impact this legislation could have. The news that Congress will attempt another vote sometime this week seems to have settled volatility, but the question remains–what, if any, changes will be made to the underlying legislation, and will it be enough to secure the votes needed for passage?

The bipartisan rejection of this bill seems to point to dissatisfaction with the nature of the bill itself, ranging from the idea of a $700 billion investment by the government/taxpayer into Wall Street banks instead of an insurance program paid for by Wall Street itself, to concerns that the bill does not do enough to protect taxpayers or prevent additional foreclosures.

Given the deep reservations over the bill’s provisions, one wonders if cosmetic, instead of structural, changes will be enough to garner votes for passage and send a message of stabilization not only to Wall Street, but also to ‘Main Street’ and Americans wondering what, if anything, will be done to help their retirement savings and ability to pay bills.

Should legislation pass, this issue is far from over. There will be increased pressure for additional regulatory and reform action from Congress, and these pressing economic issues could dominate legislative action for quite some time.

Congress is working with the Administration to find a solution this week. What that looks like, and if members feel their constituents need such a solution, remain to be seen...

Update: The Senate has released their version of the Emergency Economic Stabilization Act of 2008. Click here for the bill text. Click here for the staff summary.
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