House Republicans Fail to Act as Stock Market Drops, $1.2 Trillion Lost

When laissez fare House Republicans failed to act on a bill needed to deal with the current economic crisis the Dow Jones industrial average closed down 777.68 points, recording a fall of nearly 7 percent and its largest closing point drop in history. The Standard & Poor's 500-stock index and the tech-heavy NASDAQ each lost about 9 percent. And Adam Shell for USA Today, the vote wiped out $1.2 trillion in stock market wealth. This was the first one-day trillion-dollar loss in Wall Street history.

While anxiety over the failure to pass the House bill reigned, the Senate passed their version of a $700 billion bill by a vote of 74-25 and sent it to the House.

By voting on its own rescue package, the Senate snatched the initiative from the House, which under the Constitution normally acts first on large spending bills. Officials on Capitol Hill told NBC News that Senator Harry Reid, D., Nev, was able to exploit a procedural provision to jump the line, seeking to put pressure on House members to get on board. .

While economists such as Mark Zandi, Chief Economist at Moody's Economy.com point out that the bill would settle the market, and quell panic, House Republicans, such as Rep. Jeb Hensarling (R-Tex.), argue that such actions put the country on a "slippery slope toward socialism". Hensarling is the leader of a conservative caucus and Reaganomics is often used by Republicans as a bulwark against Socialism.

As mentioned in a previous article, "nearly all political decisions are based upon some kind of theory". And when it becomes obvious that a theory, as extreme as Reaganomics, has led to a major financial crisis, then intelligent people work on corrections. Fears of socialism are misplaced and simply represent the inability of Hensarling and others to intelligently alter their thinking and place the nation above their individual ideology.

Republicans are so sensitive to criticism of Reaganomics that they blamed House Majority Leader, Nancy Pelosi, D. Calif., for their votes against the bill when she pointed out that it was "fiscal irresponsibility, combined with an anything goes economic policy that has taken us to where we are today". Pelosi went on to correctly say that: "they (Republicans) claim to be free market advocates, when it's really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out".

Republican leader John Boehner, the Republican House Minority Leader, said that Ms Pelosi's speech had "poisoned" the Republican caucus and "caused a number of members we thought we could get to go south" making the difference in a 228-205 vote. Behner was joined by Roy Blunt, a House Republican whip, who accused Pelosi of introducing partisan discussion into the effort.

But by far the most egregious reason for voting against changes to Reaganomics was expressed by Congresswoman Michele Bachmann, R., Min., who blamed the economic problem on lending money to the lower class under the Community Reinvestment Act (CRA). She voted against the bill because it was "a return to socialism".

Republicans, like Bachmann, have been against the CRA since it was passed under the Carter Administration to prohibit financial institutions from targeting only wealthier neighborhoods, a practice known as "redlining."

Contrary to Bachmann's assertions, Professor of Law Michael S. Barr stated, in congressional testimony, said "that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. In addition, Alex Schwartznotes that the CRA is "consistently successful in meeting their goals for mortgages, investments in low-income housing tax credits, grant giving to community-based organizations, and in opening (and keeping open) inner-city bank branches".

Clearly the economic problem was not caused by the CRA, nor is interventionist legislation socialism. Arguments to the contrary hinder and do not help the Nation resolve the current economic crisis. It's now up to the House to quell the markets and do something for Main Street.

Sources

Bachmann, Michele, "Statement on the Failure of the Bailout Bill", at: http://bachmann.house.gov/News/DocumentSingle.aspx?DocumentID=104080

Bachmann, Michele, "How we got into this mess, and why we shouldn't just throw money at the problem", at"http://bachmann.house.gov/News/DocumentSingle.aspx?DocumentID=103779

Barr, Michael. "Prepared Testimony of Michael S. Barr". U.S. House of Representatives.

Kane, Paul, Montgomer, Lori, and Branigin, William, "House Narrowly Defeats Bailout Legislation, at: http://www.washingtonpost.com/wp-dyn/content/article/2008/09/29/AR2008092900623.html?hpid=topnews

McGreer, Michael. M. "Adherence to Wrong Ideology Drives Market Crash," at: http://www.associatedcontent.com/article/1067966/adherence_to_wrong_ideology_drives.html?cat=75

MSNBC and NBC News, "Both parties predict Senate to pass bailout 'Sweeteners' added with eye toward persuading reluctant House members", at: http://www.msnbc.msn.com/id/26953481/

New York Times, "Transcript of Speaker Pelosi's Speech," http://www.nytimes.com/2008/09/30/washington/30pelositranscript.html

Schwartz, Alex, "From Confrontation to Collaboration? Banks, Community Groups, and the Implementation of Community Reinvestment Agreements," http://www.innovations.harvard.edu/showdoc.html?id=3275

Shell, Adam, "Failed bailout vote hits Wall Street like a hurricane," at: http://www.usatoday.com/money/markets/2008-09-29-stocks-plunge-bailout_N.htm

Times Online, "Nancy Pelosi blamed for Wall Street bailout defeat," http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4852384.ece

Washington, Post, Dow Jones Industrial Averages at: http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&symb=DJI&nav=el

Wikipedia, Michele Bachmann, at: http://en.wikipedia.org/wiki/Michele_Bachmann

Wikipedia, "Community Reinvestment Act", at: http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Wikipedia, Jeb Hensarling", at: http://en.wikipedia.org/wiki/Jeb_Hensarling

Wikipedia, "Laissez Fare," at: http://en.wikipedia.org/wiki/Laissez-faire

Wikipedia, "Reaganomics," at: http://en.wikipedia.org/wiki/Reaganomics