Stock market plunges as Congress defeats emergency bailout bill

Published September 29, 2008 - BizTimes Daily

UPDATE:

Despite warnings from several prominent economists, President George W. Bush and the top-ranking members of both parties, the U.S. House of Representatives today voted down the Emergency Economic Stabilization Act of 2008, otherwise known as the Wall Street bailout plan, and the stock market quickly and sharply declined in reaction to the rejection.
The Dow Jones Industrials Average closed today at 10,365.45, down 777.68 points for the day.
The emergency plan mustered only 205 votes, while 228 voted against the plan, and one member of Congress did not vote. Republicans led the opposition, with 133 GOP members voting against the plan and only 65 voting for it.
The plan received 140 "Yea" votes from Democrats, and 95 Democrats voted against the plan.
Supporters of the plan warned of dire consequences to the American economy if it was rejected.
Republicans and Democrats alike criticized the Bush administration for its handling of the crisis and the original bailout plan proposed by President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Bank Chairman Ben Bernanke.
In an impassioned speech on the House floor this morning, U.S. Rep. Paul Ryan (R-Wis.) said he was "offended" by the Bush administration's original three-page bill that asked Congress to give Paulson a $700 billion check without any oversight.
Ryan urged Congress to vote on a compromised version of the bill today, "Because this Wall Street crisis is quickly becoming a Main Street crisis."
Ryan said, "We added 107 pages of taxpayer protection to this bill."
The additional provisions would ensure that taxpayers would be the first to be paid back when the economy recovers and that Wall Street will share the risks, Ryan said.
Without the emergency plan, businesses may lose access to funds to meet payroll for their employees, students may lose access to loans for college and seniors may lose have access to their savings, Ryan said.
Ryan said, "This is a Herbert Hoover moment," referring to the Republican president who was in power as the nation plummeted into The Great Depression. "I think the White House (bungled) this thing … We have to deal with this panic. We have to deal with this fear. We're here. We're in this moment," Ryan said. "If we fail to pass this, I fear the worst is yet to come … I believe in all my heart, as bad as this is, it could get a whole lot worse."
Rep. F. James Sensenbrenner (R-Wis.) voted against the bill today. In a prepared statement, Sensenbrenner said, "I am voting 'no' on the bill the House will vote on later today because it will subsidize Wall Street on the backs of hard-working taxpayers and small businesses on Main Street. To put it plainly, this legislation will not work. It will put an unbelievable amount of taxpayer money at risk, and penalize those who used common sense during a time when others elected to ignore reason by making decisions that led them to live beyond their means. It is unfair and irresponsible to ask conscientious taxpayers to now shoulder the burden and debt of those with poor foresight. Moreover, the federal government has no business injecting itself into the free market system, and essentially, taking it over. This completely defeats the purpose of such a system, and will have a chilling effect on future businesses that may think twice about entering the market if they have to compete with the American government. This is contrary to the spirit of American entrepreneurialism that is the foundation of our nation, and would turn our American Dream into an American Nightmare."
Prior to the vote, in a prepared statement, Bush said, "I appreciate the leadership shown by members on both sides of the aisle, who came together to write a very good bill. This bill provides the necessary tools and funding to help protect our economy against a system-wide breakdown."
Milwaukee Congresswoman Gwen Moore (D-Wis.) voted for the bailout plan today.
Some members of Congress were exploring the notion of reintroducing the bill for a second vote.
The stock market fell as Congress rejected the bill.
Locally, the stocks in the BizTimes Stock Index followed the broader market down this morning. The largest local decliners this morning were Bucyrus International Inc. (down $6.15 to $38.20), Joy Global Inc. (down $5.67 to $41.95), Manpower Inc. (down $3.82 to $40.60), Kohl's Corp. (down $2.83 to $46.30) and Harley-Davidson Inc. (down $1.79 to $37.92). Only a handful of local stocks gained this morning, led by Weyco Group Inc. (down $1.11 to $34.93).
Meanwhile, Wachovia Corp. became the latest domino to fall on Wall Street, as federal regulators announced this morning that the company's banking operations are being bought by Citigroup Inc.
Citygroup will acquire the bulk of the Charlotte, N.C.-based company's assets and liabilities, according to the Federal Deposit Insurance Corp. (FDIC) Under the agreement, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, while the FDIC will absorb losses beyond that.
The sale of Wachovia's banking operations to Citigroup follows the collapse of Lehman Bros., Washington Mutual Inc. and insurance giant American International Group Inc.
Meanwhile, stock shares of Cleveland, Ohio-based National City Corp. fell $2.25 to an all-time low of $1.46 per share this morning on Wall Street speculation that it will be the next debt-laden U.S. financial giant to fall.

EDITOR'S NOTE: This story may be updated again later today.

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Stock market plunges as Congress defeats emergency bailout bill

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