The Bailout Bill Leads To Another Late Night In The House
Thursday, October 02, 2008SUSIE GHARIB: Stocks on Wall Street plunged today on investor anxiety about the fate of the government's financial rescue plan and tighter conditions in the credit markets. The Dow tumbled 348 points to 10,482, that is its lowest level in three years. The NASDAQ tumbled 92. On Capitol Hill, House lawmakers debated the merits of the $700 billion bailout plan after it cleared the Senate last night. The House votes on the legislation tomorrow and many in Washington are optimistic the measure will be approved. We have two reports looking at where things stand on the eve of the House vote and whether passage will soon make it easier for businesses to get credit. We begin with Stephanie Dhue in Washington.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The focus is here now.
UNIDENTIFIED FEMALE: Congressman Baird's office.
DHUE: . in offices like Democratic Congressman Brian Baird's. He voted yes on Monday. Supporters of the plan are worried the fiscal conservative could switch to a no. But Baird says he'll vote yes again, because the cost of voting no is too high.
REP. BRIAN BAIRD (D), WASHINGTON: When people are out of work, when businesses across the country are shutting down, when schools can't afford to make payroll, when farmers can't afford to buy seed or fertilizer for the next year's crop, when banks at all levels are failing, we've got a problem. We must prevent that from happening.
DHUE: Members of the National Association of Manufacturers met with President Bush at the White House this morning to drive home the message that the economic problems have already begun. Mary Andringa of construction and farm equipment-maker Vermeer says her customers are pulling back.
MARY ANDRINGA, CO-CEO, VERMEER MANUFACTURING: This whole crisis makes everyone extremely cautious. And for our customers, especially if they can't get credit, it means they're not buying. If they're not buying, we're not able to produce, which means we don't have the jobs that are needed for our employees.
DHUE: Pine Hall Brick President Fletcher Steele says he laid off 19 people Monday because of slack demand. He wants lawmakers to pass the bill to boost confidence.
FLETCHER STEELE, PRESIDENT, PINE HALL BRICK COMPANY: People are scared, our employees are scared, they're coming to us and saying, I want to get my 401(k) money, I want to put it under the mattress. They're scared. We need something to stop the downward spiral that I think that we're in, and the crisis of confidence. We really feel like by being able to provide more credit to the system -- and this bill really does -- really provides the underpinning to do that, we can stop this downward movement.
UNIDENTIFIED MALE: Fund people's needs not Wall Street greed!
DHUE: Some consumer, community and housing advocates say this bill is not the answer. Bruce Marks of the Neighborhood Assistance Corporation of America says lawmakers need to do more to stop rising foreclosures.
BRUCE MARKS, NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA: It's the foreclosures, stupid. It's the underlying issue are the massive numbers of foreclosures. You stop that, you make those mortgages affordable, and that's the solution for the homeowners, for the community, for Main Street, and for Wall Street.
DHUE: House leaders say they are cautiously optimistic the bill will pass this time. Majority Leader Steny Hoyer says he won't even bring up a bill without the votes to pass it. Until then, both sides are working to build support. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Erika Miller in New York. Wall Street is hoping for a government rescue plan. But experts do not think it would have much immediate impact on the ailing commercial paper market. Over the past few weeks, interest rates for these short-term corporate IOUs have skyrocketed for some industrial borrowers, even top rated financial firms. Economist Brian Levitt says there's also a trickle down effect to small business, which hurts the overall economy.
BRIAN LEVITT, ECONOMIST, OPPENHEIMER FUNDS: What happens is, as banks continue to take these losses on the toxic debt on their balance sheet, they've been having a harder and harder time getting overnight lending to try and recapitalize their balance sheets. And what that does is make significantly less credit available to the small businesses that often drive employment in this country.
MILLER: Part of the problem is that money market funds, the biggest holders of commercial paper, have lost their appetite for risk in the face of the worst financial crisis since the Great Depression. But even if the government passes the bailout, credit expert Andy Brenner says recovery won't come quickly.
ANDREW BRENNER, CO-HEAD OF CREDIT PRODUCTS, MF GLOBAL: It's not going to happen right away. There have been a lot of problems here that have to be addressed and it takes time. As it -- this has been happening now for 15 months. It's not going to go away in three weeks.
MILLER: Best case scenario, experts say, it will be six months before commercial paper lending returns to normal. But interest rate strategist Ira Jersey says that's far better than what would happen if there is no government bailout package and financial firms continue have trouble getting short term loans.
IRA JERSEY, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE: You have the possibility that if they can't do that and they can't find funding elsewhere, that there will be serious problems for those firms. Not dissimilar to what you've seen in the past couple of -- in the past year.
MILLER: Tightness in the commercial paper market is bad for more than just businesses. If it continues, experts say firms will pass along higher borrowing costs to consumers or opt to layoff workers. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
