by Andie Diemer
Sept. 29, 2008
The House of Representatives rejected the proposed $700 billion plan to bail out the U.S. economy late Monday afternoon. The emergency rescue package, which aimed to buy bad mortgages to help stabilize the economy, failed by 23 votes, sending the Wall Street Stock Exchange plummeting before the vote was even complete.
The bill, which lost 228 to 205, would have been the Treasury Department’s biggest intervention since the Great Depression. The Dow Jones industrial average closed at 777 points, the biggest closing point drop in history.
About 60 percent of Democrats backed the bill while only about a third of Republicans supported it.
Jim Barbour, associate professor of economics at Elon University, said this is a situation where action needs to be taken.
“There is going to have to be some sort of intervention take place here,” Barbour said. “There’s lot of ways this could be accomplished and this bill is only one of them.”
The plan would have allowed the government to spend up to $700 billion to rescue banks and other weakening firms of assets, backed by home mortgages that are foreclosing at a record rate.
“This is a bill that is basically bailing out those people that have undertaken risky investments and those investments have not paid off and they are looking at great loss,” he said. “They are looking at assistance from the government to protect their fortunes.”
Because a bank can never be assured they are going be repaid for any loan, the situation only escalated when the banks don’t trust each other, he said.
“Unfortunately, these top-flight financial institutions are now risky loans in themselves,” Barbour said.
President Bush addressed the public before the debate began, urging lawmakers to support the plan even through resistance from taxpayers and voters.
Bush said the vote was necessary to protect the economy and in an attempt to negate claims that the bill would only benefit Wall Street’s top firms, Bush said “A vote for this bill is a vote to prevent economic damage to you and your community,” according to the Washington Post.
Barbour blames the complications on American’s unhealthy relationship with credit, weather on a personal or national level.
He said a substitute bill has probably already been created and will be put forward soon.
“I don’t like the idea that we’re in this situation, but it doesn’t change the fact that we are,” Barbour said.
This can trickle down to local communities, where people may no longer be able to get a much simpler loan for items such as automobiles.
“This affects everything that you do that involves borrowed money,” he said. “Which includes everything from running your credit card to buy a coffee to borrowing the money to buy a house when you graduate and everywhere in between.”
Caroline Fox also contributed to this article.