The House yesterday rejected the Bush Administration's $700 billion bailout proposal -- "a stunning turn of events that sent the stock market into a tailspin and added to concerns that the U.S. faces a prolonged recession if the legislation isn't revived," the Wall Street Journal writes. "The 228-205 vote, which defied a full-court press from the president and the Treasury secretary, marked a dark moment in a month that has shaken the financial system to its core and forced the government to take a host of ad hoc measures to shore up confidence. Earlier Monday, U.S. authorities helped arrange the sale of Wachovia Corp. to Citigroup Inc., while the Federal Reserve joined other central banks in injecting more funds into credit markets."
The New York Times notes the lack of leadership on display yesterday. "From the White House to Congress to the presidential campaign trail, the principal players did not rally the votes they needed in the House. They appeared not to comprehend or address in a convincing way an intense strain of opposition to the deal among voters. They allowed partisan politics to flare at sensitive moments."
"If there was any doubt that President Bush had been left politically impotent by his travails over the last few years and his lame-duck status, it was erased on Monday when, despite his personal pleas, more than two-thirds of the Republicans in the House abandoned the plan."
In fact, check out this nugget, courtesy of the Washington Post: "Yesterday, Bush called nearly every member of Texas's Republican delegation, GOP aides said. He won over four of the 19."
Another New York Times piece points out that McCain was the person who perhaps had the most riding on bailout bill that collapsed yesterday. "Mr. McCain had announced last week that he was suspending his presidential campaign to work to ensure the legislation's passage, even at the risk of skipping the first presidential debate unless a deal was locked down. (He later relented, debating without a deal.) He had called for the high-level White House meeting that some participants later called unhelpful. And after some initial hesitation, he had allowed himself to be identified with a bill that he thought necessary even if unpopular."
"So when the deal fell apart on the House floor Monday, in no small measure because most of the chamber's Republicans balked at voting for it, the McCain campaign worked to contain the potential for damage. The first defense was to go on offense."
The AP's Babington adds, "The house always wins, gamblers are warned, and the U.S. House made John McCain pay Monday for his politically risky, high-profile involvement in a financial rescue plan that came crashing down, mainly at the hands of his fellow Republicans."
A bit after 6:00 am ET, Obama released a statement calling for Democrats and Republicans to come together to address the financial crisis and proposing one step to get greater support for the bailout measure: increasing the limit of FDIC insurance up to $250,000. "Thanks to measures put in place during the Great Depression, deposits of up to $100,000 are guaranteed by the federal government. While that guarantee is more than adequate for most families, it is insufficient for many small businesses that maintain bank accounts to meet their payroll, buy their supplies, and invest in expanding and creating jobs. The current insurance limit of $100,000 was set 28 years ago and has not been adjusted for inflation. That is why today, I am proposing that we also raise the FDIC limit to $250,000 as part of the economic rescue package – a step that would boost small businesses, make our banking system more secure, and help restore public confidence in our financial system."
McCain was on Morning Joe, and said this about the bailout: "We didn't convince enough Republicans and Democrats that this was a rescue package and not a bailout package… We have to do a better job of the effect this is going to have on Main Street. The whole spectrum of Main Street economy is going to be jeopardized... I am going to come back ... come back again. This is a tough situation, one of the toughest I've ever seen -- if not the toughest… I am confident we can pass legislation because we have to do it." McCain also said he agreed with Obama's suggestion to raise FDIC limit to $250,000 from $100,000
The Washington Post: "Congressional leaders and the White House faced several options, none of them palatable just weeks before a heavily contested presidential election. Democratic leaders could choose to return with a measure guaranteed to win more Democratic votes, even at the expense of Republican support. Instead of simply purchasing distressed assets from financial institutions, some Democratic economists favor injecting lenders with cash in exchange for stock, letting the institutions figure out what to do with the mortgage-backed securities and other troubled assets weighing down their books."
More: "Republicans were advocating slight changes to the bill that could attract a handful of new votes. Party members might be enticed by a measure that would allow businesses to write off more past losses on this year's taxes or a more robust expansion of mortgage insurance, financed by banks. Democrats could add more assistance to ailing state and local governments without raising too many GOP objections."
Can the Senate come to the rescue? Politico: "The collapse of Treasury's financial rescue plan in the House sent Wall Street into a tailspin Monday and left congressional leaders looking for ways to recover — possibly by starting anew in the safer Senate. Senate Republicans are more supportive of Treasury Secretary Henry Paulson and the massive $700 billion government intervention than are their House counterparts. And leading House Democrats believe that a strong Senate vote — coupled with turmoil in financial markets — will create enough pressure for the House to relent."
An instant Washington Post/ABC poll conducted yesterday found that 45% supported the bailout measure and 47% opposed it. But nearly nine in 10 "expressed concern that the failure of the bill could lead to a more severe economic decline." More: "Asked to assess responsibility for the legislation's failure, 44 percent said Republicans were the reason, 21 percent said the Democrats and 17 percent said both sides were responsible."