The Senate easily approved the $700 billion bailout plan last night with a 74-to-25 vote. The Senate’s strong, albeit reluctant, endorsement of the rescue package left supporters optimistic that the House will approve the measure by the end of the week. In what USA Todaydescribes as “a maneuver to reverse a stinging House rejection of the plan,” the Senate added several popular measures to the original bill. How many? Well, just think of it this way: The rescue package began as a three-page proposal by the Treasury Department and now clocks in at 451 pages. These additions include an increase in bank insurance limits and a host of popular tax breaks for businesses and individuals that add up to $150 billion. Its passage in the House remains far from certain as fiscally conservative Democrats have long opposed extending the tax breaks unless they were offset by tax increases or spending cuts. Still, Republican leaders said they are optimistic that the sweeteners would be enough to convince some lawmakers to change their vote.
“Instead of siding with a $700 billion bailout, lawmakers could now say they voted for increased protection for deposits at the neighborhood bank, income tax relief for middle-class taxpayers and aid for schools in rural areas,” notes the New York Times. Indeed, the Los Angeles Timespoints out that a few “of the changes appeared aimed at enticing specific lawmakers,” including expanded coverage of mental illness and a tax break for bicycle commuters. The Wall Street Journal says that the bill now has “a number of tax breaks that have been attacked by fiscal conservatives, including an exemption from a 39-cent excise tax for children’s wooden practice arrows.” But as angry as they may be about these additions, the Washington Postsuggests that, despite the increased burden on the taxpayer, many fiscally conservative Democrats will simply hold their noses and vote yes in order to get the legislation to the president as soon as possible.
Adding to the drama of last night’s Senate session, both presidential candidates went back to Capitol Hill to cast votes in favor of the bill. Their presence meant that Sen. Edward Kennedy, who is being treated for brain cancer, was the only senator who didn’t vote. Barack Obama gave a speech on the Senate floor, and the WP points out that he “echoed President Franklin D. Roosevelt’s first fireside chat to the nation during the Great Depression” by calling on Americans to have “confidence and courage” during the economic downturn. John McCain didn’t address the chamber. The NYT reports on a bit of political tension that was evident last night as Obama “walked to the Republican side of the aisle to greet [McCain], who offered a chilly look and a brief return handshake.”
The WSJ is alone in mentioning that the new bill also includes a measure that reaffirms the Security and Exchange Commission’s power to suspend so-called mark-to-market accounting. The move “was meant to send a message to the agency to re-evaluate the issue,” which has “gained surprising traction” in recent days, says the WSJ. The banking industry is strongly pushing for the suspension of the rule that forces financial institutions to report the current market price of their assets even if they have no intention of selling them. Some lawmakers are convinced the change could save taxpayers billions of dollars, while others say it would merely increase uncertainty. In a proposal so obvious that TP is mad he didn’t think of it before, the WP’s Steven Pearlstein says there’s an easy way to split the difference: “Require banks to disclose market prices right alongside their own estimates of ‘fair value.’ Let the investors decide which to rely on.”
The WSJ says the Fed is considering cutting interest rates even if the bailout package makes it through Congress. The Fed has been reluctant to continue cutting rates due to fears of inflation. But after a string of bad economic data, officials are once again worried about “the risk of a severe recession,” which is “known as a ‘tail risk’ because its likelihood is small but its effect would be catastrophic.”
Now that the bailout has crossed one legislative hurdle, it’s a good time to look back and answer the all-important how-did-we-get-here question. Today, the NYT offers up a long but highly readable look at how a “36-hour period two weeks ago … spooked policy makers by opening fissures in the worldwide financial system.” While it should come as no surprise that the “credit crisis has played out in places most people can’t see,” the NYT does a good job of explaining how the failure of Lehman Bros. led to a crucial wave of panic among hedge-fund managers that seemed to have no end in sight. And while the plan to buy toxic securities may have appeared to come out of nowhere, the NYT also makes clear that Fed and Treasury officials had been talking about the possibility since the bailout of Bear Stearns.
In a Page One piece, the LAT takes a look at how McCain’s shift from talking about the dangers of big government to being a proponent of federal intervention in the financial crisis is a move the senator “has perfected in 26 years on Capitol Hill.” The Republican nominee may follow his party’s line in pushing for smaller government, but he’s also quick to embrace strong government regulation whenever there’s a crisis or scandal. While this willingness to break from his party’s rhetoric is part of the reason McCain is often called a “maverick,” it also means that it’s “hard to discern how the politician who boasts of delivering ‘straight talk’ would govern from the Oval Office,” says the LAT.
On the day when the vice-presidential candidates are set to debate, the WP fronts a new poll that shows how voters have quickly fallen out of love with Sarah Palin. Although her selection was seen as a possible game-changer, the poll reveals that she could actually end up hurting McCain among key groups. Six in 10 voters say she lacks the experience to be effective as president, and one-third say they’re less likely to vote for McCain because of her presence on the ticket. Most critical to McCain is the revelation that while independent voters were split on Palin’s experience last month, they now “take the negative view by about 2 to 1,” says the Post. But in the expectations game, Joe Biden is clearly the loser. Voters by a 19-point margin think the senator will do better in the debate.
The NYT fronts a puzzling piece about Biden that shockingly reveals the senator who has served in Washington for 35 years isn’t really an “average guy.” Yes, Biden may be able to say he comes from a working-class neighborhood, but he now lives in a much bigger house than the average American! Well, that’s not entirely fair, as the article does reveal some questionable use of his campaign funds. But ultimately, there just isn’t much there as the entire crux of the article seems to be that he “appears to have benefited at times from the simple fact of who he is.” So, does that mean he received a below-market interest rate when he went out looking for a loan? Nope. But the bank did pay special attention to his application, which hardly seems surprising considering that any well-known person would have likely received the same treatment. The NYT also mentions some real-estate dealings that do not sound 100 percent kosher but, again, can’t point to anything improper about them.
While Americans worry about the financial crisis, a NYT Page One story should serve as a reminder about how things could be much, much worse. In (yet another) fascinating dispatch from Zimbabwe, the paper details just how ridiculous the country’s hyperinflation has become. The government has imposed strict limits on how much money Zimbabweans can get out of banks, which means that many must stand in line for hours simply to get enough cash to buy a bar of soap. That is, if they’re lucky enough to get anything at all. As money loses value “literally by the hour,” many public employees, including teachers, nurses, and garbage collectors, have simply stopped showing up to work because their salaries don’t even cover the cost of taking public transportation to get there.
The WSJ takes a look at how mackerel has become the currency of choice among inmates after federal prisons prohibited smoking in 2004. Americans as a whole aren’t big fans of the oily fish, but demand from prisons has grown in the past few years. “It never has done very well at all, regardless of the retailer,” says one mackerel supplier, “but it’s very popular in the prisons.”