Congress Passes Historic $700 Billion Wall Street Bailout ("Rescue Package")

In one of the fastest pieces of legislation to move through the political system of the United States, president Bush signed into law Friday afternoon, October 3, the $700 billion bailout legislation (expanded into an $850 billion rescue package) that was passed today just before noon. An amazingly short forty-eight minutes passed from bill passage to signing. Just a mere two weeks ago, Secretary Treasurer Henry Paulson proposed a $700 billion bailout of Wall Street and met behind closed doors in Washington with key legislators to iron out a plan that might pass the House of Representatives and the Senate.

And it still failed. Capitol Hill was inundated with mail, e-mail, phone calls, and petitions to vote down the legislation. Legislators were scrambling for their political lives.

Two days later, the Senate passed the measure by a three-quarters majority, with addenda -- $150 billion worth.

And two days after that, on Friday, the House of Representatives went round two with the bill. This time, the House passed the bill by a substantial margin, 263-171. Many Congressmen changed their votes due to "sweeteners," earmarks that were added to the bill, and because of the drastic drop in trading on Wall Street after the failure of the bill to pass on Monday (the Dow Jones fell 778 points, the largest single day drop in history). The number of people communicating a negative response to the bill was also lighter as voters began to feel that something needed to be done to shore up the flagging American economy. Repackaging the bailout legislation not as a "bailout" of Wall Street but a stabilizing buyout to free up lending capital helped alleviate doubts as well.

Secretary Paulson said that he would get to work immediately to implement the new authorities given him and would work in close cooperation with Ben Bernanke, Chairman of the Federal Reserve.

Some are now labeling the passage and signing of the $850 billion bailout bill as a Paulson-Bush financial coup d'etat.

So What Happens Now?

The massive $700 billion bailout ("rescue package") remains unpopular. Rep. J. Gresham Barrett (R-SC), who originally opposed the measure, told the Associated Press, "No matter what we do or what we pass, there are still tough times out there. People are mad - I'm mad." He added, "We have to act. We have to act now."

Still, there are no guarantees. The $700 billion Henry Paulson now controls will be used to buy bad financial assets that are clogging lending markets. But, as some economists point out, after those assets are bought, there is no guarantee that the lending companies will then begin lending. A tight credit market could remain in place, making the economy worse, not better.

Add to that news from the Labor Department Friday that over 150,000 more jobs were lost last month. Those numbers are expected to grow in the coming months.

And even though the legislation has been passed into law by the president's signature, it will be weeks before any of the money will be free to begin buying assets. President Bush stressed the need for patience.

Leading economists, according to CNN, say that an economic turnaround may not come until late 2009, if then.

What This Means For The Average Taxpayer

Economists argue over what benefit the average taxpayer will gain from the legislation. Some say that it only props up the lending industry for a while without guarantees that those institutions that receive aid will actually remain afloat. In fact, there are no guarantees that any of the institutions aided will do anything but eventually go out of business. And many worry that the hands that were extended this time will be extended again and again in the coming years.

However, other economists say that taxpayers could potentially regain all their money. And bailing out the financial industry to help free up credit is a better alternative than doing nothing and simply watching financial institution after financial institution fail. The $700 billion bailout potentially saves jobs, keeps businesses afloat, and allows lending institutions to stay in business. But only potentially.

Yet, Congress passed this measure without a single hearing. It is unknown how many -- if any -- economists were actually consulted when crafting this massive bill.

But the one thing that all of those economists agree on - none of it is certain.

One aspect of all the Washington drama is that it is not lost on the American people how quickly legislators and Washington movers and shakers moved into overdrive to pass legislation to aid the financial institutions - those seen as instigating the current financial crisis - but took several months to pass legislation designed to help the average citizen save their home. Another aspect - and perhaps more damning - is that this piece of legislation is still overwhelmingly unpopular among the voting public, something that has been communicated to Washington for the past couple weeks.

And when voters feel ignored, it is often reflected in the votes they cast on Election Day.

There is one certainty in all of this - the American taxpayer saw another $850 billion dollars of their money allocated to be spent on something with which they truly disagree.

Sources:

Bizjournals.com
Associated Press
CNN Television