Bailout rejected; new bill vowed – The Boston Globe

Posted by: clickry on: September 30, 2008

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Treasury Secretary Henry Paulson (right) pledged yesterday to renew negotiations with lawmakers. He said he has ”significant tools in our tool kit” to fix the economy, but they are ”insufficient” to solve the current crisis without a bailout deal. (Joshua Roberts/Bloomberg)
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WASHINGTON – President Bush and congressional leaders, stunned by the defeat of a $700 billion Wall Street bailout plan yesterday, vowed to quickly craft a new proposal to win over skeptical lawmakers before the worst financial crisis in generations deteriorates into a widespread economic meltdown.

The stinging rejection of Bush’s plan by the House of Representatives – by just 23 votes – sent the stock market into a nosedive of historic proportions. It also injected uncertainty into whether the Senate will take up the measure as expected tomorrow, or whether any bill can garner enough public support and calm a jittery market.

Bush said yesterday he was “disappointed” with the House vote and said he intended to lobby Congress, including recalcitrant members of his own party who helped kill the bill. But the vote was a sign of his waning influence: It came just days after Bush delivered a prime-time speech to sell the plan and pressure lawmakers.

“We’ll be working with members of Congress,” he told reporters at the White House. “Our strategy is to continue to address this economic situation head-on.”

Later, Treasury Secretary Henry Paulson grimly said he has “significant tools in our tool kit” to fix the economy, but they are “insufficient” to solve the biggest economic crisis since the Great Depression without a government bailout deal. Paulson, who would have obtained unprecedented power to shore up ailing firms under the defeated plan, pledged to renew negotiations with lawmakers. “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people,” Paulson said after emerging from a White House meeting. “We need to get something done.”

In the meantime, Wachovia Corp., one of the nation’s largest banks, yesterday joined a growing list of leading financial institutions whose bad-mortgage-related debt has led them to the brink of collapse. In a deal facilitated by the Federal Deposit Insurance Corp., Citigroup will absorb as much as $42 billion in Wachovia losses, while the FDIC will cover the rest.

Moments after the vote, House members streamed into the hallways of the Capitol and pointed fingers at the opposition.

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