$700B Bailout Bill Passes The Senate...Again
Wednesday, October 01, 2008SUSIE GHARIB: All eyes are on Capitol Hill tonight where the U.S. Senate is expected to vote on a revised version of the government financial rescue plan. The vote is scheduled for 7:30 p.m. Eastern time and the bill is expected to pass easily. Optimism over that likely approval helped stabilize stocks today, as the Dow and NASDAQ posted modest losses. Our Washington bureau chief, Darren Gersh, has been tracking developments on Capitol Hill, and he joins us now, Darren?
DARREN GERSH, NIGHTLY BUSINESS REPORT WASHINGTON BUREAU CHIEF: Oh, boy, Susie, this is as dramatic a moment as you can imagine in Washington. Now the Senate hopes, say, hopes, its vote on the financial rescue package will help force action in the House by the end of the week. Supporters of the rescue package now say they are hearing from Main Street and the news is not good. Senate Majority Leader Harry Reid says a car dealer in Nevada is telling him he can't get loans to buy cars.
SEN. HARRY REID (D-NV), MAJORITY LEADER: The credit markets are frozen. Major companies are on the verge of going under. GERSH: Bruce Josten at the U.S. Chamber of Commerce says the message from business is increasingly blunt:
BRUCE JOSTEN, U.S. CHAMBER OF COMMERCE: If you don't do this, you run the risk of tipping this economy into a pretty severe recession.
GERSH: The president once again urged action.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It's important to get credit flowing again so that small businesses and our communities will be able to finance their operations, so that local municipalities will be able to get the money they need to take care of the needs of local citizens, so that states will be able to meet their needs
GERSH: Opponents of a bailout say they are still getting calls from grateful taxpayers congratulating them on voting no. But the price of opposition is rising. In the Senate, the rescue package has now been paired with popular tax cuts like the temporary fix for the alternative minimum tax, sales tax deductions, research and development tax credits, and a much higher limit of $250,000 on FDIC-insured deposits. Now the big question in all of this is how it will play out in the House. An influential player in that will be Congressman Barney Frank. He's the chairman of House Financial Services Committee. A few minutes ago I talked with Frank, and I began by asking him whether the votes will be there to pass this bill in the House.
REP. BARNEY FRANK (D-MA), CHAIRMAN, FINANCIAL SERVICES COMMITEE: I'm hopeful, I'm not confident. I really still think that the turmoil we are seeing within the Republican Party is extraordinary. And as I said, I'm hoping that it will work out and everything is being done that can get there. I guess the biggest thing that has happened were the effects of our not passing the bill. You know, on Monday, many of my colleagues were saying, well, this is all scare tactics. Sadly, the bill's defeat has produced many of the negative effects we feared, and I think that's having some impact on people's votes.
GERSH: We'll get to the big picture in a minute, but it sounds to me like, you know, with what the Senate has added to this package, tax cuts, things like that, will that make it more difficult for Democrats to come on board? Is that going to put the package at risk on your side?
FRANK: Well, the tax cuts they're doing are widely supported on the Democratic side. These are not across the board tax cuts for very wealthy people that the Republicans have specialized in. These are what we call tax extenders. These are targeted tax incentives for researcher and development for energy that ought to be made permanent, frankly, but for budgetary trick reasons have to be renewed every so often. Now there is a problem in the House, many members of the House, particularly our more moderate group known as the Blue Dogs very much believe that the deficit has got to be under control. And ironically it's their Republican counterparts who don't seem to think that. They say if we're going to extend these tax incentives, which are generally widely supported, they should be offset by revenue increases. And we call that that the pay-go principle. The Senate has not held to that. The House passed many of these same tax extenders before but with revenues to pay for it. So there is some negative feeling on the part of some of the Blue Dog Democrats, who are really hawkish on trying to keep the deficit down, and I sympathize with that approach obviously, but it's not that the incentives themselves are controversial; they are generally very favorably seen. But it's the lack of offset that's the problem.
GERSH: One of the things that I'm hearing when I talk to people in the markets and when I talk to people about whether this package will do what it needs to do, they say, look, this is an issue of trust and confidence. People don't trust the financial markets and they don't have confidence in Washington. So how will this package, assuming it passes, do the job and help the economy?
FRANK: Well, it's not based solely on trust. It is actually going to provide some real resources to the troubled sectors. Now we have a situation where because of an absence of regulation that the conservatives who are in power really for much of the past couple decades could do, the private sector made a lot of bad mistakes and they clogged up the system. This is an effort to unclog the system. It's step one. Step two has to be next year that we put regulations in place that prevent this from recurring. It would be fruitless to deal with this problem and let it happen again. But what we're talking about is not inspiring confidence by good words, we're talking about the secretary of the treasury using his authority to buy equity in some companies, to buy up some of the troubled assets, to actually instill some money, not some confidence, into the system by unblocking it. So as I said, confidence, no. You would hope there would be some confidence as a part of it, and in fact, the lack of confidence really is one of the rationales for the plan because our assumption is that there are assets out there that are depressed beyond the real value by the psychology that's so negative. And that means that the federal government -- that's why this isn't going to cause anything like $700 billion and could conceivably come close to breaking even. Because this is a chance that the federal government, which is the only one that has the resources to do it, to go in and buy up assets that, as I said, are depressed, in many cases, below what their ultimate value will be, hold them, sell them at a reasonably moderated pace, and so in that sense, we hope the confidence is restored, but after money has been put in.
GERSH: When will it take effect -- Chairman Frank, but if it goes into -- if it is passed, do you think this will be a matter of weeks before we can see some of these sales or months?
FRANK: Oh, I don't think anybody realistically thinks that you can predict that. Nobody knows that. We are talking -- they will be buying these things. I do think within a few weeks, you will see some credit restored. But I think anybody who is realistic about the economy knows you can't make that kind of prediction.
GERSH: Congressman Frank, I'm afraid we're going to have to leave it there for now. We hope to have you back on and thank you for your time.
FRANK: You're welcome.
GHARIB: Darren, what's your sense? I mean, what's holding up House lawmakers from passing this bill?
GERSH: Well, Susie, I mean, it's still $700 billion and there's still a lot of people who have philosophical differences and just don't like that idea of bailing out Wall Street. The push is obviously that the economy looks like it's getting much worse and the vote's going to be on Friday it looks like when the unemployment report comes out in the morning.
GHARIB: All right. And we still don't know it's supposed to be a pretty bad employment report, but putting that aside, if we don't get a bill this week, what happens next?
GERSH: Oh man, that's anybody's guess. I mean, the leaders of Congress, the president, everybody said that Congress can't leave without a bill. But at a certain point, you know, this is a confidence game. You're trying to restore confidence in the markets and in Washington, and if you keep not passing a bill, I don't see how that restores confidence. At a certain place you just cut your losses.
GHARIB: Well, the clock is certainly ticking. We'll have to wait to see what happens. Darren, thank you so much for your report and update. That's our Washington bureau chief, Darren Gersh.
GERSH: Thank you.
