The Los Angeles Times, New York Times, and USA Todaylead with the continuing bailout politics as the Bush administration sent some of its top officials to Capitol Hill yesterday in an effort to convince lawmakers they need to pass the $700 billion plan as soon as possible. Instead of falling in line as many had expected, congressional opposition to the bailout seems to be growing every day. The men of the hour, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, appeared before the Senate banking committee to push lawmakers toward action. In what USAT calls perhaps his “darkest economic assessment” since becoming chairman, Bernanke warned that the current crisis is unlike anything the country has ever seen, and failing to approve the bailout would have “significant adverse consequences for the average person.” Despite these dire predictions, congressional opposition, particularly from Republicans in the House, was so strong that by last night “it was no longer certain that a version of the Paulson-Bernanke plan could win passage,” the LAT declares.
The Wall Street Journal banners, and the NYT off-leads, news that Warren Buffett will invest $5 billion in Goldman Sachs. The WSJ calls the cash infusion by the famous investor “one of the biggest expressions of confidence in the financial system since the credit crisis intensified early this month.” Financial stocks, including Goldman’s, surged in after-hours trading as Buffett’s decision “immediately heartened investors,” says the NYT. The Washington Postleads with a new presidential election poll that suggests the economic turmoil is helping Barack Obama, who now has the first clear lead in the general-election campaign. Among likely voters, Obama leads John McCain by 52 percent to 43 percent. A mere 9 percent rated the economy as good or excellent, and 50 percent cited it as the most important issue. That undoubtedly helps Obama, who has a sizable advantage as the candidate best-suited to handle the current financial crisis.
Vice President Dick Cheney was dispatched along with a few top White House officials yesterday morning to meet with House Republicans and try to convince them to approve the bailout plan as quickly as possible. But the closed-door session appeared to do little to convince lawmakers that the economy is doomed if a bailout doesn’t pass. “Just because God created the world in seven days doesn’t mean we have to pass this bill in seven days,” Rep. Joe Barton, R-Texas, said after the meeting.
The LAT reports that Democratic leaders in Congress “admitted privately that they had been thrown off course by the vehemence of the opposition.” Democrats warned they would not move forward with such a massive plan unless they had significant Republican support. As the NYT points out, Democrats are now particularly worried that a lack of support from GOP lawmakers “could leave them in an undesired alliance with the Bush administration.” None of the papers spells it out, but it seems clear that Democrats are worried this is part of a Republican strategy to distance themselves from the bailout to then turn around and use its passage against Democrats in the upcoming elections.
Despite all the huffing and puffing, the LAT wonders whether Congress would really “dare to kill or seriously delay the only plan on the table—and, if it did, would an economic debacle ensue?” Paulson and Bernanke were emphatic yesterday that the plan is vital to the economy’s survival even as they insisted that they weren’t happy about having to ask for this kind of authority from Congress. “I share the outrage that people have. I think this is embarrassing,” Paulson told the Senate banking committee. Senators met the two men “with a nearly universal tone of disgust,” says the Post, and they characterized the bailout as a golden parachute for the companies that got us into this financial mess in the first place. At times it seemed like there was a competition going on to see who cared most about the average taxpayer, and Paulson and Bernanke played along, insisting the bailout plan is designed to help (you guessed it) the taxpayer, not Wall Street fat cats.
For now, the angry lawmakers aren’t saying they’ll vote against the bailout but rather are concentrating on key changes they want to insert in the legislation. The one that now seems inevitable is the limit on executive compensation for the firms that participate in the bailout because the presidential candidates, as well as key lawmakers from both sides of the aisle, have expressed support for the measure.
Democrats are also pushing hard to give taxpayers an equity stake in the participating companies. But Paulson and Bernanke were adamant that they would oppose the changes because, as the LAT helpfully explains, the goal of the plan is to help markets regain the ability to set prices for their toxic assets, and if only the most desperate companies participate, then the market won’t believe the resulting sale prices, thus making the whole thing a pointless exercise. This is why Bernanke also said the government should pay a reasonable price rather than the cheapest price possible for the troubled securities.
Paulson will speak to House Republicans this morning, and he and Bernanke will face the House financial services committee, which, as the NYT points out, “could prove even more hostile than the Senate banking panel.”
One of the likely reasons for all the grandstanding in Capitol Hill is that lawmakers know voters are watching. The WP’s poll reveals that 52 percent of people believe the economy is in a serious long-term decline while around 80 percent say they are concerned about the direction of the economy. The majority of white voters who say they are concerned with the economy’s direction support Obama. The new poll also shows that Obama has a 21-point lead with independent voters, which is a marked change from the small lead McCain enjoyed after the Republican Convention.
The LAT also has a poll that generally confirms the WP’s finding that voters think Obama would do a better job handling the financial crisis than McCain. A “solid majority” of the 50 percent of Americans who said they feel less financially secure now than they did six months ago favor putting Obama in the White House. The LAT also reports that 55 percent of respondents said the government shouldn’t be planning a bailout, although that figure probably has more to do with the way the question was asked—whether it’s “the government’s responsibility to bail out private companies with taxpayers’ dollars”—and it’s unclear whether Americans understand how the rescue package would work.
In other campaign news, the NYT fronts and the WP goes inside with word that a lobbying firm co-owned by Rick Davis, McCain’s campaign manager, received payments from mortgage giant Freddie Mac until last month. Freddie Mac apparently paid the company approximately $15,000 a month starting at the end of 2005. And that’s on top of the $2 million Davis received from both mortgage giants from 2000 to 2005. Why does this matter? Well, it doesn’t really, except that McCain has spent lots of time lately attacking Obama for his supposed ties to chief executives of the mortgage giants. On Sunday, the Republican nominee said Davis had no involvement with Freddie Mac for the last several years. But hey, it might have been easy for Davis to forget because, according to the NYT’s sources, Davis didn’t do much work for his $15,000-a-month paycheck as his company was apparently kept on the payroll simply because of its ties to McCain. Davis took a leave from the company for the campaign but continues to have a financial stake in its success.
In an interesting Page One piece, the WP points out that while Paulson and Bernanke insist the massive bailout is the only way to save the economy from Armageddon, other experts disagree and say there are several other ways the government could get involved without risking so much taxpayer money. The government could, for example, simply lend money to troubled banks or concentrate on preventing foreclosures. Alternatively, some think the government could stimulate Wall Street by repealing the capital gains tax for two years.
The NYT’s David Leonhardt writes that members of Congress are taking their eyes off the ball. Instead of simply focusing on how to solve the crisis while limiting taxpayer cost, many are choosing to focus on “sideshows.” And while that’s hardly a novelty in Congress, the fragile state of the markets means “there’s no time to waste.” Even though the efforts to cut executive pay and change bankruptcy laws “are based on a worthy instinct,” the best way to deal with the larger problems in the economy “is to make sure the government spends as little [as] possible on an effective bailout.”
The WP’s Steven Pearlstein notes that while much has been said in the past few days about how to rescue the financial system, no one has uttered two crucial words: “We’re sorry.” These two words “have been conspicuously absent” from the debate, and they’re precisely what Americans need to hear. “Until Wall Street can muster the decency, the humility and the good sense to acknowledge its colossal screw-up,” writes Pearlstein, “it shouldn’t be surprising that Americans are balking at writing the check.”