The Capitol is illuminated under stormy skies Sunday evening as Congress works on a bailout for the American economy
After voting against the Bush Administration's controversial $700 billion bailout package, Representative Elton Gallegly, 64, a California Republican, got on a plane to fly home to Los Angeles for Congress's three-day break in observance of the Jewish holidays. By the time he got off the plane late Monday, he'd lost $50,000 in retirement savings. "And I'm getting to the point in my life where I can't start over," Gallegly laments.
Though he says he doesn't regret his "No" vote, Gallegly is adamant that the House must pass a bill to stabilize the nation's fragile financial markets. Whereas phone calls to his office were once running 40 to 1 against the bill, now they're "a mixed bag. There are a lot of folks who, for good reason, are very concerned about their 401(k)s and their retirement savings, and it's a very serious and legitimate concern," he says.
It's amazing what a 778-point drop in the Dow Jones Industrial Average, wiping out $1.2 trillion in equity, can do to change public opinion. An ABC News/Washington Post poll taken following the failed vote showed that 88% of Americans are concerned that the collapse of the bill could worsen the economic turndown and that 51% are confident that a bill will eventually pass. And where the people go, politicians very quickly follow. Most members explained their votes opposing the bill Monday as a reflection of their constituents' anger about a rescue package for Wall Street. "Since the vote, it's about half and half," Representative Tim Murphy, a Pennsylvania Republican who voted against the bill, says of the calls coming into his office. "Half say, Do something — I'm worried about my business or my retirement; and the other half still say, Don't vote for the bailout."
House members already having second thoughts about their votes will probably soon have a chance to change them. But rather than wait for their Hill colleagues to take the plunge again, the Senate is expected to try to build momentum by taking up virtually the same bill Wednesday night, with two key sweeteners added on: a measure increasing from $100,000 to $250,000 the maximum amount in individual-bank-account deposits that the Federal Deposit Insurance Corp. (FDIC) will guarantee, and an extension of tax incentives, popular with GOP members, for such things as alternative energy, business R & D and the prevention of more people from becoming subject to the Alternative Minimum Tax. As further incentive, Securities and Exchange Commission chairman Chris Cox Tuesday eased mark-to-market accounting rules that have forced financial institutions to value all distressed mortgage-backed securities on their balance sheets at fire-sale prices. The move has been sought by many House Republicans hoping to help get the paralyzed credit markets flowing again, though critics say any such change would be a step back for transparency.
The new bill is expected to pass the Senate easily, with both John McCain and Barack Obama coming back to Washington to cast their votes, but the House remains a hurdle. The add-ons should help with Republican votes, but the tax extenders are unpopular with moderate, or so-called Blue Dog, Democrats, who are deficit hawks and have never liked that the estimated $100 billion extenders are only half paid for. House Speaker Nancy Pelosi has made it clear that she wants to see the GOP make up the shortfall of 12 votes by sending, in conjunction with her Senate colleague Harry Reid, a letter to President Bush outlining their intention to keep working to craft a truly bipartisan solution, in spite of the bitter feelings left over from Monday's debacle. Still, she may lose some Blue Dog votes by attaching the tax bill. And while House Majority Leader John Boehner green-lighted this newest legislation, his credibility on Capitol Hill isn't great after only 37% of his party conference followed his lead in supporting the bill Monday.
Success in the House will depend on persuading ambivalent Republicans like Gallegly and Murphy to change their votes. And business groups have wasted no time in launching a full frontal assault to do just that. "You want a complete meltdown with the financial system? Bluntly, clearly and crisply that would be a catastrophic event. So that's what we're trying to avoid," says Bruce Josten, executive vice president of the U.S. Chamber of Commerce, which represents 3 million U.S. businesses. The chamber is just one of several associations, representing American business large and small, that are writing letters, getting members to write letters, holding conference calls, organizing trade groups and courting the media as part of a massive lobbying push for the bailout bill. "We are using every arsenal available to us to get the business community's outrage heard," Josten says.
Indeed, the business groups' online campaign has been so intense, the House e-mail server has been crashing ever since the bill failed. Their first target is the marketing of the legislation, and specifically how it is described. "It's not bailout, so you've got to get your term right," snaps Josten. That means Congress is working to pass a workout, a rescue package, an economic-stabilization plan. And Republican and Democratic Senators alike paraded across C-SPAN Tuesday doing what they could to underline that the crisis is not about helping fat cats on Wall Street but saving average Joes from economic calamity. "The waitress isn't getting the tips that she depended on to bring home for her family and the challenges her family has," said Senator Robert Menendez, Democrat of New Jersey, on the Senate floor, gesturing to a blown-up photo of a rather pathetic-looking waitress next to him.
But they still have a ways to go in persuading some members. "Some of the calls for 'Yes' we're now getting are being ginned up by outside groups," says Representative Devin Nunes, a California Republican who voted against the measure. "All these people who have their hand in the cookie jar are trying to get Paulson to bail them out."
The House is expected to vote Thursday or Friday on the measure. In the absence of true House GOP leadership, it's anyone's guess if the bill will pass this time around, though the turning of public opinion is helping. The Senate going first should place additional pressure on House members to get it passed. That, and the specter of an even more brutal market meltdown if the House actually fails a second time around.
(See TIME's Pictures of the Week here, and see photos of the global financial crisis here.)