Below The Beltway

As the no votes piled up in the House of Representatives, it became clear that the bailout bill was goner, and it ultimately fell thirteen votes short of the majority needed to pass:

WASHINGTON — In a moment of historic import in the Capitol and on Wall Street, the House of Representatives voted on Monday to reject a $700 billion rescue of the financial industry. The vote came in stunning defiance of President Bush and Congressional leaders of both parties, who said the bailout was needed to prevent a widespread financial collapse.

The vote against the measure was 228 to 205, with 133 Republicans joining 95 Democrats in opposition. The bill was backed by 140 Democrats and 65 Republicans.

Supporters vowed to try to bring the rescue package up for consideration again as soon as possible, perhaps late Wednesday or Thursday, but there were no definite plans to do so.

Stock markets plunged as it appeared that the measure would go down to defeat, and kept slumping into the afternoon when that appearance became a reality. By late afternoon the Dow industrials had fallen more than 5 percent, and other indexes even more sharply. Oil prices fell steeply on fears of a global recession; investors bid up prices of Treasury securities and gold in a flight to safety. House leaders pushing for the package kept the voting period open for some 40 minutes past the allotted time, trying to convert “no” votes by pointing to damage being done to the markets, but to no avail.

The vote was a catastrophic political defeat for President Bush, who was described as “very disappointed” by a spokesman, Tony Fratto. Mr. Bush had put the full weight of the White House behind the measure and had lobbied wavering Republicans in intensely personal telephone calls on Monday morning before the vote. Both presidential candidates also supported the plan.

Supporters of the bill had argued that it was necessary to avoid a collapse of the economic system, a calamity that would drag down not just Wall Street investment houses but possibly the savings and portfolios of millions of Americans. Moreover, supporters argued, a lingering crisis in America could choke off business and consumer loans to a degree that could prompt bank failures in Europe and slow down the global economy.

Opponents said the bill was cobbled together in too much haste and might amount to throwing good money from taxpayers after bad investments from Wall Street gamblers.

Immediately after the vote, many House members appeared stunned. Some Republicans blamed Speaker Nancy Pelosi, Democrat of California, for a speech before the vote that disdained President Bush’s economic policies, and did so, in the opinion of the speaker’s critics, in too partisan a way.

I didn’t see Pelosi’s speech live, but it apparently pissed off a number of Republicans who may or may not have been on the fence. Was it overly partisan ? Watch, and judge for yourself:

Frankly, it’s not surprising that whatever bipartisanship there might have been on the Hill today broke down after that speech, but what was particularly galling was the fact that after the vote was over, Barney Frank and Pelosi accused Republicans of “failing to deliver” on a supposed promise of bipartisanship:

“There is a terrible crisis affecting the American economy . . . and because somebody hurt their feelings they decided to punish the country?” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. He accused the Republicans of “covering up the embarrassment of not having the votes” that they said they would to help pass the bill. He challenged the GOP to “give me those 12 people’s names, and I will go talk uncharacteristically nicely to them” to persuade them to vote in the best interests of the nation.

Pelosi maintained that Democrats “delivered on our side of the bargain” by getting 60 percent of House Democrats to support a bill that was built around the Bush administration’s proposal, whereas 67 percent of House Republicans voted against it.

“The legislation has failed,” she said, but “the crisis has not gone away. We must work in a bipartisan way to have another bite at the apple.”

Of course you must, because one outright defeat apparently isn’t enough.

As the no votes piled up, traders on Wall Street started selling, though, and the day ended with markets sharply down across the board:

Spooked investors fled the market today after the House rejected the $700 billion financial plan to rescue the financial market.

The Dow Jones industrial average closed down about 778 points, at 10,365. That was nearly a 7 percent drop. The Nasdaq lost 200 points, about 9 percent, and the broader Standard & Poor’s 500-stock index fell 106 points, a decline of nearly 9 percent.

The Dow’s point drop set a new record, topping the sell-off in the wake of the Sept. 11, 2001, terrorist attacks, when the Dow lost nearly 685 points. However, as a percentage drop, today’s losses do not compare to many of the market’s historic single-loss days.

Investors fled to the safety of U.S Treasury bonds. Facing increasing demand, the yield on 2-year bonds, fell from 2.1 percent to 1.7 percent. A smaller yield reflects that investors are willing to accept less from their investment as they seek a safe place for their money.

Investors also sought safety in gold, pushing the pirce up $40 an ounce today, while oil prices fell $10 to $96 barrel in trading today.

And I’m sure we’ll see more turmoil in the market tomorrow, because it’s going to take at least a day or two for the political leadership in Washington to figure out what to do next.

I’m frankly surprised that the bill failed given the atmosphere of panic that the Bush Administration and the Democratic leadership were trying to convey. Obviously, more than a few members, Republican and Democrat, but mostly Republican were listening to their constituents.

Where do we go from here ? I expect a revised bill, and a new vote within a day or two