In our ongoing effort to provide our clients and friends of the firm with updated information and insight on developments related to legislation to support the financial markets, the Foley & Lardner LLP Financial Crisis Response Team is pleased to provide the following summary of today’s events in Washington.
Today’s stunning defeat of the financial markets rescue bill by the House of Representatives has shaken the markets and left leaders in Washington scrambling for alternatives and new paths to reassure the markets. After the 228-205 vote in the House, Democratic Congressional leaders met in House Speaker Pelosi’s office to discuss the next step and their GOP counterparts were expected to meet as well to discuss future legislative efforts.
An analysis of the votes shows that the 37 Members in the most competitive races voted against the bill by a margin of 27-10. The Democrats voted 140-95 for the package (approximately 60% in favor). The Republicans voted 65-133 (approximately 30% in favor). The Democratic Leadership was surprised by how many Democrats voted against the bill and the Republican Leadership expected at least 70-75 votes in favor of the bill. As expected, most of the Democrats and Republicans who have difficult re-election campaigns voted against the bill by approximately a 3 to 1 margin. Some of the most liberal Democrats voted against the bill, as did many of the most conservative Republicans.
Senate Banking Committee Chairman Sen. Christopher Dodd (D-CT) appeared at a news conference this afternoon and said he hoped Members would reconsider their positions and come back later in the week to pass the legislation. He also said that the vote against the bill was more about the public’s lack of understanding about the bill than a problem with the legislation itself. Sen. Judd Gregg (R-NH), who helped negotiate the defeated bill, said that Congress must address the issue aggressively and quickly to reassure markets.
The path forward is complicated by the fact that several key Members will not be immediately engaged in the ongoing talks due to Rosh Hashanah. Leadership will take a long and hard look at the stock market response to today’s vote and if it continues to trend downward, then there will be greater impetus for the Members to return. It is expected that the Administration will offer suggestions on how to pick up more Republican votes and persuade Members to return Wednesday or Thursday and stay until a bill has been completed. There has been some discussion that the Senate move first on Wednesday with the House following.