12 Eye-Opening Thoughts About the Bailout's Defeat

We're watching economic history in the making. There is no consensus on what Congress is going to do next or what's going to happen on Wall Street in the coming weeks. Hundreds of billions of dollars are at stake, and it's clear that the decisions that are being made now are going to have a massive effect on all of us.

To help readers cut through the media overload, we've gathered together a dozen views from smart, alternative thinkers on the bailout, the politics surrounding its defeat and predictions about where the economy, and the government's actions, might go from here.

What Happened

There's been quite a bit of discussion about exactly what happened with the bailout bill ...

Robert Kuttner offers his views, along with some suggestions for the Democratic leadership looking forward ...

In refusing to provide enough votes to enact a bipartisan bailout bill, Republicans may well have done Democrats a favor. The Democratic leadership gave up several provisions that their members wanted, including more relief for homeowners. But the Republican leadership took the position that they had extracted all they could get, and GOP House members were now free to vote their consciences. In practice that meant listening to the uproar of constituent backlash against a bill that did much for Wall Street and little for the common American. So the easy Republican vote was "No."

House Speaker Nancy Pelosi had been promised that 80 or 90 Republicans would vote for the bill. That way, both parties could share responsibility. But in the end, just 66 Republican votes materialized.

According to my sources, once Pelosi learned of the double-cross, she told the Democratic whips to make it a conscience vote on the Democratic side as well. With the likelihood of voter indignation and the strong possibility that this bill would not fix what was broken, Pelosi was not prepared to make this primarily a Democratic bill. Knowing that the Republicans were walking away from the deal, she held the roll call anyway, to make clear just whose failure this was.

When the vote came up short, she held it open a few minutes but made rounding up additional supporters the Republicans' problem. When the votes did not materialize, she banged the gavel, and the bill went down.

What now?

... The moment for this bill may have passed. Pelosi was also facing growing rebellion in Democratic ranks.

... Both parties will now go back to the drawing board -- and it is here that Republican calculations may have backfired, big time. For while many Republican legislators are posturing populist, they really don't have anything up their sleeves that is true to right-wing ideology, that will please angry taxpayers, and that will fix the problem. Vote No is not a program, and as the crisis deepens the vote will look increasingly cynical and opportunist.

Pelosi not only had to work for the Paulson plan, she had to immunize her own folks against a potential campaign crusade by GOP ideologues that this was "socialism, socialism, socialism," foisted off on the public by Democrats now in charge of both houses of Congress.

Voters, meanwhile, had been persuaded this was indeed a taxpayer bailout for the rich, not a rescue plan for the very financial structure of the country. Their calls to congressional members ranged from 100-1 against to 300-1 against ...

Pelosi said from the outset that many liberal Democrats would not budge from the opposition. She also continued the tradition of the late House Speaker Thomas "Tip" O'Neill of understanding that "all politics is local" and that if a vote would mean sure defeat back home, the member could get a pass.

Pelosi and her team told Boehner they could get between 125 and 140 Democrats and that Boehner and Blunt would need to find between 80 and 100 Republicans. That seemed feasible Sunday.

On Monday, Pelosi delivered, Boehner fell short ...

Boehner said Pelosi had chased away a dozen wavering Republicans when she gave a speech saying the vote on this unpalatable $700 billion rescue plan had been made necessary by eight years of Bush policies, including lax oversight on Wall Street ...

Pelosi could have skipped the partisan speech on the eve of the vote -- but she was still trying to rally reluctant Democrats to swallow the bitter medicine.

Few Republicans had been on the House floor to hear Pelosi's speech, and none reacted when they heard it. It was later, after the shocking setback of the vote itself, that GOP leaders seized on the Pelosi speech to rationalize their own failure.

Ultimately, however, the blame-Pelosi excuse didn't help against Boehner.

It made him look even weaker. He had gotten only a third of his House Republicans to back the bill, far short of what he had promised. ... It turns out that Boehner knew hours before the vote ... that Republicans would be far shy of their goal, which could spell defeat for the overall bill.

If Pelosi had known that, she might have delayed the vote. That might have alarmed the markets but probably wouldn't have spooked them the way the actual defeat did.

This generation of political leaders is confronting a similar situation, and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. Instead, by rejecting the rescue package on Monday, they have made the psychological climate much worse.

George W. Bush is completely out of juice, having squandered his influence with Republicans as well as Democrats. Treasury Secretary Henry Paulson is a smart moneyman, but an inept legislator. He was told time and time again that House Republicans would not support his bill, and his response was to get down on bended knee before House Speaker Nancy Pelosi.

House leaders of both parties got wrapped up in their own negotiations, but did it occur to any of them that it might be hard to pass a bill fairly described as a bailout to Wall Street? Was the media darling Barney Frank too busy to notice the 95 Democrats who opposed his bill? Pelosi's fiery speech at the crucial moment didn't actually kill this bill, but did she have to act like a Democratic fund-raiser at the most important moment of her career?

And let us recognize above all the 228 who voted no -- the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.