JIM LEHRER: That surprising defeat of the financial rescue plan. NewsHour congressional correspondent Kwame Holman begins our coverage.
KWAME HOLMAN: The unexpected rejection came after the morning’s cautious optimism that the bill would pass. As the “no” votes mounted, Wall Street underwent a drastic sell-off.
And when the vote was declared final, leaders from both parties blamed each other, a sharp contrast to the bipartisan praise for the rescue plan when it was finalized over the weekend.
House Republican Leader John Boehner said a pre-vote speech by the Democrats’ leader, Speaker Nancy Pelosi, drove away Republicans.
REP. JOHN BOEHNER (R-OH), House Minority Leader: I do believe that we could have gotten there today had it not been for this partisan speech that the speaker gave on the floor of the House.
I mean, we were — we put everything we had into getting the votes to get there today, but the speaker had to give a partisan voice that poisoned our conference, caused a number of members that we thought we could get to go south.
Insufficient supporting votes
KWAME HOLMAN: Pelosi's speech had reiterated her previous support for the bailout bill, but also criticized President Bush's legacy on fiscal matters.
REP. NANCY PELOSI (D-CA), Speaker of the House: ... $700 billion, a staggering number, but only a part of the cost of the failed Bush economic policies to our country, policies that were built on budget recklessness.
When President Bush took office, he inherited President Clinton's surpluses -- four years in a row budget surpluses -- on a trajectory of $5.6 trillion in surplus.
And with his reckless economic policies, within two years he had turned that around. And now, eight years later, the foundation of that fiscal irresponsibility, combined with an "anything goes" economic policy, has taken us to where we are today.
KWAME HOLMAN: Deputy Whip Eric Cantor was responsible for rounding up Republican votes.
REP. ERIC CANTOR (R), Virginia: Right here is the reason, I believe, why this vote failed, and this is Speaker Pelosi's speech that, frankly, struck the tone of partisanship that, frankly, was inappropriate in this discussion.
There is -- there is -- and there were several meetings, day in and day out, of members on both sides of the aisle trying to get up to speed on this issue of the economy and of the capital markets and, frankly, a lot of agreement.
KWAME HOLMAN: In mid-afternoon, the Democratic leadership told their side of the story.
REP. NANCY PELOSI: ... when the legislation came to the floor, the Democratic side more than lived up to its side of the bargain. While the legislation may have failed, the crisis is still with us.
KWAME HOLMAN: Ninety-five Democrats voted against the bill, while 133 Republicans voted no. The bill fell 13 votes short of passage.
REP. NANCY PELOSI: We would have half the votes, and they would have half the votes, because we believed that this had to be bipartisan.
A call to pass a measure
KWAME HOLMAN: Chief Democratic negotiator and House Financial Services Chairman Barney Frank said Pelosi's speech should not have affected Republicans' commitment to the rescue.
REP. BARNEY FRANK (D), Massachusetts: But think about this. "Somebody hurt my feelings, so I will punish the country." I mean, that's hardly plausible.
And there were 12 Republican members who were ready to stand up for the economic interests of America, but not if anybody insulted them. I'll make an offer. Give me those 12 people's names, and I will go talk uncharacteristically nicely to them.
KWAME HOLMAN: Majority Leader Steny Hoyer.
REP. STENY HOYER (D-MD), House Majority Leader: No Democrat that we could get to vote for the bill didn't vote for the bill. It was controversial on our side. This was not our administration's request; it was the Republican administration's request.
But we tried to do everything in our power to meet the administration request. President Bush was on the television in the Rose Garden at 7:35 this morning.
KWAME HOLMAN: That presidential statement came two hours before financial markets opened today, as the House was preparing to debate.
GEORGE W. BUSH, President of the United States: Now that this legislation has been agreed to by leaders of both parties, it must be passed by houses -- both houses of Congress. And I fully understand that this will be a difficult vote.
KWAME HOLMAN: A week-and-a-half of intense negotiation produced the version of the rescue that came to the floor. But the bill's supporters acknowledged it was distasteful to many members and their constituents.
REP. BARNEY FRANK: Madam Speaker, rarely have the members had so many reasons for wishing we weren't here.
KWAME HOLMAN: Financial Services Chairman Frank insisted the measure must pass.
REP. BARNEY FRANK: This is a tough vote. This is a vote where many of us feel that the national interest requires us to do something which is in many ways unpopular because what we are talking about to many of us is the need to act to avoid something worse.
Congress set to reconvene
KWAME HOLMAN: Even though a vote approving rules for debating the bailout was close, few thought it signaled the demise of the financial rescue, even as liberal Democrats and conservative Republicans lined up to criticize it.
California Democrat Lynn Woolsey.
REP. LYNN WOOLSEY (D), California: With only three months left of this current administration, why are we willing to even make available $700 billion to this administration?
President Bush and Secretary Paulson have been wrong from the start on just about everything. If you think they'll be responsible with this money, think again.
KWAME HOLMAN: Michigan's Thaddeus McCotter has led a chorus of Republicans who disdained the bill as a government giveaway.
REP. THADDEUS MCCOTTER (R), Michigan: And it was no mistake that, during the 1917 Bolshevik revolution, the slogan was, "Peace, land, and bread." Today, you are being asked to choose between bread and freedom.
KWAME HOLMAN: Texan Jeb Hensarling heads the Republican Conservative Caucus.
Republican Paul Broun of Georgia left little doubt about his feelings toward the bill.
REP. PAUL BROUN (R), Georgia: This is a huge cow patty with a piece of marshmallow stuck in the middle of it. And I'm not going to eat that cow patty.
KWAME HOLMAN: This afternoon, House leaders announced the chamber will reconvene on Thursday to try again on a financial bailout bill.