OUR OPINION: House defeat of bailout bill a harbinger?
That sinking sound you may have heard Monday morning was the sound of the stock market, the U.S. House of Representatives voted against a proposed $700 billion emergency rescue, or “bailout,” proposal aimed at reviving an econony that appears to be falling into dire straits.
The decision to deter the largest government-funded intervention since the Great Depression led to a near immediate nosedive on Wall Street, with stocks falling as far as 705 points Monday morning.
The news also came in advance of yet another bank, Wachovia, selling its assets to avoid going under. The Federal Deposit Insurance Corp., which insures deposits at failed banks, arranged for the sale of the banking assets of Wachovia, the nation's No. 4 bank holding company, to Citigroup for $2.2 billion in stock.
Wachovia was preceded in such moves over the past three weeks that shocked the financial world. First, the Treasury Department seized mortgage finance firms Fannie Mae and Freddie Mac. Lehman Brothers then filed for bankruptcy, followed by rival Merrill Lynch being purchased by Bank of America.
The Fed also bailed out insurance giant American International Group (AIG), loaning it $85 billion in return for a nearly 80 percent stake in the company. Friday, Washington Mutual, the nation's largest savings and loan, became the largest bank failure in history when it went under.
Monday’s vote also proved to be a ominous sign that the President George W. Bush-backed plan may never see the light of day. Even with Bush speaking in support of the plan earlier in the day, members of his own party stood against the idea.
“Every member of Congress and every American should keep in mind - a vote for this bill is a vote to prevent economic damage to you and your community,” Bush said in comments made early Monday morning.
The vote came with 228 representatives in opposition to the bill and 205 representatives in favor of the move. It needed 218 votes to pass.
According to voting records, about 60 percent of Democrats voted for the measure. However, less than a third of Republicans supported it. Many lawmakers opposed the plan for reasons such as the bill’s massive price tag that would expand the national debt even further. Republican members said their constituents were calling at a ratio of 10 to 1 in opposition of the bill, describing it as too much government intervention.
While we agree that something must be done to rectify this error, we do not feel it should be done at taxpayers’ expense. Why should these financial corporations who made the decision to make lending decisions to those who wouldn’t be able to pay their mortgages be saved by anyone??In a market economy, companies live and die by their decisions. If the company’s leaders make bad decisions, why should it be dependent on the government to nanny them and clean up their messes?
But, one can argue that if the federal government would stop the bleeding now, it would cause a much lighter effect on the rest of the country in the long run. With these large financial institutions crashing, the effects could ripple down to Main Street from Wall Street. Hopefully, a medium can be reached before that happens.