Friday, October 3, 2008

The Bailout: House Jitters?

The Bailout: House Jitters?

On Thursday night, Oct. 2, all eyes were on the Vice-Presidential debate. Friday, however, they will turn again to the House of Representatives, as it holds a do-over of its dramatic Monday vote. Will the House this time deliver the financial-system bailout that the Administration and business groups are demanding, and which the Senate passed Wednesday night?

The odds seem good. But that's a far cry from the near-certainty that preceded the Senate vote. And after Monday's sudden about-face, it hardly inspires confidence.

To be sure, new poll figures suggest public opposition to the financial rescue bill (, 10/2/08) isn't as strong as it seemed Monday. Several dissenting lawmakers have publicly said they'll vote "yes."

Buffett on the Horn

Lobbyists are pulling out all the stops (, 10/2/08). And word is that House leaders won't bring the bill to a vote at all unless they are sure—really, absolutely sure—that it will pass. Democrats were set to caucus at 6:30 p.m. ET Thursday. Meantime, rumors raced that the Oracle of Omaha, Warren Buffett himself, had been calling lawmakers to urge passage. His $5 billion investment in Goldman Sachs (GS) and $3 billion investment in General Electic (GE) could run into big trouble if the package does not go forward. (Buffett's office declined to comment.)

So maybe everyone's just being careful to avoid falling flat on their faces again. And yet, there are a few troubling signs. "I don't think they have the votes yet," Dan Clifton, a Washington analyst for Strategas Research Partners, said Thursday afternoon.

A good part of the uncertainty lies in the very changes that the Senate made to win over the Republicans who balked on Monday. The bill, which started life as a three-page proposal from Treasury Secretary Henry Paulson, has swollen to more than 400 pages (, 10/1/08), fattened up most recently with tax breaks and an increase in federal bank-deposit insurance limits, as well as the mental-health parity bill that is being used as the procedural vehicle to carry the whole shebang from Senate to House.

Fostering Green Energy

A slew of tax breaks added in the Senate—many of them extensions of existing business breaks or intended to foster green-energy initiatives—have boosted support from nonfinancial companies, who now have an incentive to lobby for the bill.

The tax package included many popular provisions aiding not only businesses but upper-income households—it would continue a fix to prevent millions of taxpayers from being subject to the dreaded Alternative Minimum Tax, for example. Yet not all of those provisions are paid for by spending cuts or new revenue—something detested by fiscal conservatives, whose ranks include many Republicans as well as the so-called Blue Dog Democrats.

At the same time, the various concessions to business and the right has many on the left, including unions and consumer groups, hopping mad. "They've Christmas-treed this up for business," one lobbyist said before the Senate vote. Left-leaning groups have been pushing for the House to add various measures to aid families, homeowners, and municipalities in return, such as extending unemployment benefits, reviving a previously discarded provision to allow judges to modify mortgages in bankruptcy, or offering assistance to state and local governments. They hinted that more Democrats might bolt if these measures aren't taken.

Fears of Bogging the Bill Down

House leaders have been scrambling to head off problems—and resisting calls to add anything more to the bill for fear of bogging it down. A senior Democratic staffer says the Blue Dog Democrats are expected to support the measure on the grounds that their fiscal principles favor aiding the broader economy. And he says House leaders are likely to offer an extension of unemployment insurance with a separate bill. That avoids another vote in the Senate to approve any changes to the financial-crisis measure; there's been no deal with Republicans to pass an unemployment measure, the staffer adds.

A handful of public vote-switchers suggests the House leadership was having some success. Representatives Ileana Ros-Lehtinen (R-Fla.), Zach Wamp (R-Tenn.), and Emanuel Cleaver (D-Mo.) are among those reported by the Associated Press to be for the bill after previously being against it. They cited the tax-break additions and changes in public sentiment for their changes of heart.

"I hate to say it, but the Dow being down 300 points (, 10/2/08) helps the vote count," says one well-connected Republican lobbyist from the manufacturing sector.

  • The Bailout: Public Anger, Private Talks
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