WASHINGTON – Negotiations on a $700 billion bailout of Wall Street descended into partisan bickering on Monday after a failed House vote sent stocks spiraling down more than 700 points in intraday trading.
The House quickly divided into hostile camps on what had intended to be a bipartisan bill, with both sides saying the other had not held up its end of the bargain. Indeed 40 percent of Democrats and two-thirds of Republicans opposed the legislation in the 205-228 vote against the bill.
Republicans were quick to blame House Speaker Nancy Pelosi for the bill's failure, saying a pre-vote speech in which she criticized the Bush administration's handling of the economy had turned Republican votes against the bailout.
"This is not a partisan crisis, this is an economic crisis," said Deputy Minority Whip Rep. Eric Cantor, who said that 94 Democrats also refused to go along with the bill. He described the vote as the result of "Speaker Pelosi's failure to listen and failure to lead."
House Republican Conference Chairman, Rep. Adam Putnam of Florida, said "he was disappointed that the process that yielded a bipartisan approach took a very marked, partisan tone at the end of the debate."House Minority Whip Roy Blunt said he thinks Republicans could have provided a dozen more votes had Pelosi not given her speech.
But House Financial Services Committee Chairman Barney Frank, D-Mass., took umbrage with that claim.
"Because somebody hurt their feelings they decide to punish the country. ... I mean, that's hardly plausible<" said Frank. noting that the number of Republicans insulted was the same needed to pass the legislation. "I'll make an offer. Give me those 12 people's names and I will go talk uncharacteristically nicely to them."
Sen. Lindsey Graham, R-S.C., told FOX News that Democrats knew how tenuous the bill was they shouldn't have played with fire.
"Congressman Frank is funny and clever but there's nothing clever about this. Why would you poison the well right before the vote is about to take place?" he asked.
In her speech, Pelosi asked lawmakers to swallow hard and support the legislation. But she also piled on the administration.
"When was the last time someone asked you for $700 billion?" Pelosi asked in a floor speech shortly before the vote. "It is a number that is staggering, but tells us only the costs of the Bush administration's failed economic policies — policies built on budgetary recklessness, on an anything goes mentality, with no regulation, no supervision and no discipline in the system."
Without commenting on her criticism or the GOP response, Pelosi said that Republicans have not received the message from the White House that bipartisanship was needed.
"We delivered on our side of the bargain," Pelosi said, congratulating Democratic leaders for getting 60 percent of the caucus to support the White House bill. "We extend a hand of cooperation to the White House, to the Republicans so we can get this issue resolved"
At the White House, President Bush was resuming talks with his economic team, including Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson, to determine the next steps. In a meeting with Ukrainian President Viktor Yushenko, Bush urged both sides to get back to the drawing board.
"I was disappointed in the vote of the United State Congress on the economic rescue plan. We put forth a plan that was big because we got a big problem. I'm going to be talking to my economic advisers after my meeting here with the president. and we'll work with members of Congress on the way forward. Our strategy is to continue to address this economic situation head on, and we'll be working on developing a strategy that will enable us to move forward," he said.
With the start of Rosh Hashanah at sundown on Monday, lawmakers had decided to stay in session to look for a solution, though Frank, Cantor and other Jewish lawmakers were unlikely to be involved in the negotiations.
House Majority Leader Steny Hoyer said Democrats will take a look at what to do next.
"We did our part," said Hoyer of Maryland. "As I said on the floor, this is a bipartisan responsibility and we think (Democrats) met our responsibility."
Asked whether majority Democrats would try to reverse the stunning defeat, Hoyer said, "We're certainly not going to abandon our responsibility. We'll continue to focus on this and see what actions we can take."
The bailout bill had aimed to open up clogged credit lines for financial markets that had come to a near collapse. Sellers continued to shed stocks as the market teetered down more than 730 points after the vote ended.
The legislation had been a tough swallow for many lawmakers, who saw government coming to the rescue of an out-of-control financial market that had played fast and loose with housing loans.
Representatives worked throughout the weekend to make a bill palatable. Republicans had insisted on a mortgage securities insurance paid by firms who had invested in bad housing loans. That was included in the bill voted on Monday as were provisions to prevent executives from getting massive severence packages, additional congressional oversight, more transparency and accountability and a means to let the taxpayer get back its investment before shareholders.
But many lawmakers continued to oppose the plan for a variety of reasons, including the massive price tag that would expand the national debt, and GOP members said their constituents were calling 10-1 in opposition to the bill, which had been described as too much government intervention.
House leaders held open the vote as they tried to sway reluctant lawmakers to support the plan. Arm-twisting continued even after the vote clock expired. One member, retiring Republican Rep. Jerry Weller, did not vote.
A White House spokesman said administration officials will meet and then contact congressional leaders.
"The crisis we are facing remains," said White House Deputy Spokesman Tony Fratto, who added, "We're obviously disappointed."
Fratto said that he thinks many Americans were mistaken by believing that the bill was a "bailout of Wall Street." Instead, he said the bill was to prevent a large economic crisis.
"Nobody wants to bail out Wall Street, and we understand Americans might be opposed to bailing out Wall Street ... This is not a bailout," he said. "We hope Americans don't need to see real evidence of a break down in order to prevent a break down."
Earlier in the day, Bush argued that jittery U.S. taxpayers will benefit from a number of safeguards that lawmakers wrote into the pending legislation during weekend negotiations on Capitol Hill, including checks and balances on the operation of the program.
Supporters — even Republicans — said they didn't like the bailout but didn't want to play with history or risk an economic collapse.
"I'm not willing to put that bullet in the revolver and spin it. I will take the political risk," said Rep. Spencer Bachus, R-Ala., the ranking member of the House Financial Services Committee.
"We're all worried about losing our jobs," said Rep. Paul Ryan, R-Wis., before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it — not me.'
"We're in this moment, and if we fail to do the right thing, Heaven help us," he said.
Bush used a four-minute speech at the White House to try to assure Americans that the plan is good for the country.
"I'm confident that this rescue plan along with other measures taken by the Treasury Department and the Federal Reserve will begin to restore strength and stability to America's financial system and overall economy," Bush said. "And I'm confident in that in long run, America will overcome these challenges and remain the most dynamic and productive economy in the world."