Despite a tumultuous weekend of bipartisan negotiations to rework the Bush administration's $700 billion proposal to resolve the U.S. financial crisis, House Republicans revolted yesterday and led a stunning rout of the president's plan. They blamed partisan politics for their vote against the package, but that was pure political grandstanding. And it won't help the country overcome the grave financial crisis threatening it.
These are many of the same Republicans who supported an unfettered free market economy with few regulations and limited government oversight - the very scenario that experts say led to the kind of creative financing in the mortgage industry underlying the current financial meltdown.
House GOP leader John A. Boehner blamed his colleagues' rejection of the president's reworked plan on House Speaker Nancy Pelosi's criticism of the Bush administration's lax attitude toward Wall Street's "anything goes" way of doing business. That doesn't account for the 95 Democrats who joined their GOP colleagues to defeat the package, and it's a lame excuse anyway. House Republicans can't have it both ways - they supported the administration policies for which many of their constituents are now paying the price, both personally in terms of declining home and retirement fund values and collectively as taxpayers.
What's next? Doing nothing is not an option. Yesterday, the stock market closed down 777 points, a historic and ominous reaction to the vote in Washington.
When Congress returns to work Thursday, House leaders need to knock heads to come up with enough support to pass the rescue plan, which calls for the government to purchase the financial sector's tanked assets, curb exorbitant executive compensation packages, help homeowners threatened with foreclosure and provide independent oversight.
It's not a perfect plan - it gives the U.S. treasury secretary unprecedented power to intervene in the financial markets and doesn't do nearly enough to ensure that ordinary Americans who are struggling can keep their homes. Nor can anyone, including Treasury Secretary Henry M. Paulson Jr., guarantee it will stabilize the financial markets. But it offers the best hope to arrest the stock market's slide and free up credit so companies and small firms can keep doing business. And it paves the way for the government to renegotiate some high-risk mortgages so people can meet their payments.
What has been lacking in this debate is a clear explanation of how the frozen credit markets affect ordinary voters who pay their mortgages, contribute to a 401(k) and have their pension funds invested in the stock market. They are telling their representatives in Congress to vote against this measure, without realizing that the result could put their prospects in jeopardy. The Bush administration should have done a better job identifying exactly how the crisis on Wall Street could play out on Main Street. Its initial three-page rescue plan appeared to reward executives for their bad decisions, while telling homeowners who took on more mortgage than they could afford to just tough it out.
No one is blameless for the financial catastrophe now threatening the nation, and that's why Congress must get its priorities straight - putting the economy back on track should be the first order of business. Lawmakers need to approve a rescue plan while there's still time.
