Robert Kuttner: After the Bailout Failure: What Now?

[marmar]

from the American Prospect:



After the Bailout Failure: What Now?
The failure of the bailout bill may be a blessing in disguise. Now, maybe, Democrats can get this right.

Robert Kuttner | September 29, 2008 | web only



In refusing to provide enough votes to enact a bipartisan bailout bill, Republicans may well have done Democrats a favor. The Democratic leadership gave up several provisions that their members wanted, including more relief for homeowners. But the Republican leadership took the position that they had extracted all they could get, and GOP House members were now free to vote their consciences. In practice that meant listening to the uproar of constituent backlash against a bill that did much for Wall Street and little for the common American. So the easy Republican vote was "No."

House Speaker Nancy Pelosi had been promised that 80 or 90 Republicans would vote for the bill. That way, both parties could share responsibility. But in the end, just 66 Republican votes materialized.

According to my sources, once Pelosi learned of the double-cross, she told the Democratic whips to make it a conscience vote on the Democratic side as well. With the likelihood of voter indignation and the strong possibility that this bill would not fix what was broken, Pelosi was not prepared to make this primarily a Democratic bill. Knowing that the Republicans were walking away from the deal, she held the roll-call anyway, to make clear just whose failure this was.

When the vote came up short, she held it open a few minutes but made rounding up additional supporters the Republicans' problem. When the votes did not materialize, she banged the gavel, and the bill went down.

What now?

First, we will face the inevitable round of recriminations. But the record is pretty clear. The Democrats were prepared to step up and take a politically difficult vote. The Republicans weren't -- and were willing to play Russian roulette with fragile financial markets. ......(more)

The complete piece is at: http://www.prospect.org/cs/articles?article=what_now_08

[polichick]

1. "she told the Democratic whips to make it a conscience vote on the Democratic side as well"

Pelosi did the right thing under these circumstances. k&r

[Tallison]

2. I agree with him that the following provisions should be included:

1) An RFC-style agency to have the government take over or take major equity positions in failing banks.
2) Direct refinancing of threatened mortgages, on the model of Roosevelt's Home Owners Loan Corporation.
3) Extension of FDIC guarantees -- and standards -- to other financial institutions, with government takeover if they fail.
4) A small transfer tax on financial trades to pay for a lot of the cost of recapitalizing Wall Street.

While such measures would certainly alienate more Republican votes, perhaps it will recruit more Democratic dissenters.