UPDATE: Financial 'Bail Out' Fails in House, Market Plunges

An American economy once thought to be booming seems perched on the brink of a near disaster and Legislation to execute a Federal "bail out" has failed to pass the House of Representatives.

WASHINGTON, DC (Catholic Online) - The eyes of America and much of the rest of the world were fixed on Washington D.C. all day. In the US House of Representatives,a massive Federal Government effort to fix what ails the American economy was discussed, dissected and debated. The specifics of those discussions became the subject of speculative reports appearing throughout the media all day on Monday. An economy which was once thought to be booming now seems perched on the brink of a near disaster and an effort by the Federal Government to pass so called "bail out" legislation has failed to gather the necessary votes in the House of Representatives.

The United States House of Representatives began debate on the proposed legislation Monday morning. Long weekend sessions appeared to have produced some agreement between Democrats and Republicans. Leaders from both sides of the aisle worked long into the evening hours to secure compromise on specific issues which divided them. This was to lead to a vote early Monday afternoon in the House of Representatives. Then, the legislation was to be sent to the Senate where a vote could occur on Wednesday. Finally, the legislation was to end up on the Presidents desk. He made it clear, as recently as in an early Monday morning address, that he would sign it.

In the meantime, the Financial Markets reflected the insecurity and concerns of the Nation. The instability of the American economy has fueled fears among those who have the most to risk, hard working men and women who are increasingly incensed that it has all come down to this. The questions abound in the workplace, the shopping centers, the car pools and around the kitchen tables of a Nation that is in shock that this has all happened.However, the so called "Bail Out Bill" has now been soundly defeated.The defeat caused many investors to bail out of the Stock Market, out of continued fears over the state of the US economy. This sent the Down Jones average down over 700 points at one point. The stock market plunge began even before the final tally, 228-205 against the Bill, was tabulated.

In the wake of this solid defeat, the finger pointing immediately began. Each Party blamed the other for the failure of the vote. However, the acrimony went much further.Republicans reacted strongly to a speech given by Speaker Nancy Pelosi during the session wherein she blamed Bush administration policies for all of the economic woes facing the Nation.They see it all quite differently, pointing to the Democratic failure to police the problems at the failed Fannie Mae and Freddi Mac which had precipitated much of the latest turmoil.

The Bush administration expressed its serious disappointment over the failure of the legislation to pass. They pledged to return with another effort. However, the sentiment from constituencies at home led many lawmakers to question the prudence of many of the Bill's provisions,especially since they faced reelection races at home. In the end, over two-thirds of Republicans voted against the measure and 40 percent of all Democrats also opposed it.

In the wake of this turn of events leaders of both Parties are now gathering to determine what their next move will be. Spokesperson for the Administration, Tony Fratto told reporters that the President was "very disappointed".The scene on the floor during the roll call for the vote was dramatic, tense and terse. Lawmakers shouted out the news of the falling Dow Jones average as each side struggled for 40 minutes to win votes to support the measure.They failed.Serious concerns grew concerning the very idea that tax payers were to bear the drastic consequences of bad loans made by people who knew better, but went ahead and made them anyway. Even the vote to begin debate on the measure barely passed with 220 votes in favor and 198 against. The initial bill, prior to the weekend revisions,would have vested unprecedented power in Secretary of the Treasury to spend $700 billion dollars to buy "toxic" mortgage assets, removing them from bank balance sheets. It consisted of a three page proposal. It was soundly rejected once it became clear what it really entailed.

The "Emergency Economic Stabilization Act of 2008" replaced it with over 100 pages of details.However, it has now failed to gain the support of a majority. It would have provided for the purchase of bad mortgages from at risk financial institutions, enabling them to then raise new capital and continue lending money to businesses, municipalities and consumers. It would have established a process for regulatory oversight of the process. It would have placed the financial burden on the taxpayers. Though the taxpayers would have been given an "ownership interests' in these poorly performing assets, serious questions were raised as to the real value of such a position.Republicans insisted upon and received language in the Act which compelled the banks and other financial institutions who would have been rid of their poorly performing assets to buy Government insurance to back the principal and interest on them. They maintained that the insertion of this insurance fund protected the taxpayers and reduced their risk.

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Representatives from both Parties have been besieged by constituent communications over the legislation which indicated that the American Public was growing increasingly skeptical of the plan. As a result of these communications the legislation included numerous protections against corporate enrichment and greed.Limits were set on so called "golden parachutes", executive compensation packages which have in the past given some heads of unsuccessful financial institutions huge amounts of money to retire, while the shareholders and the public lost their life savings.

However, in the end, none of it was enough. The Legislation went down to a startling defeat and with it, the Stock Market fell dramatically.Now,the Nation awaits the next effort.

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