Why the Bailout Failed: The Power of the American People

We are being told several reasons why the Wall Street bailout package failed to pass the House of Representatives. The Republicans blame Speaker of the House Nancy Pelosi, the Democrats blame Republican laissez-faire ideologues. The real reason the bill failed is quite simple: the American people voiced their displeasure and their representatives actually listened, according to Fortune.

The bailout – The Emergency Economic Stabilization Act of 2008 – was killed in the House by a relatively close vote of 228-205. Though the bill has been pushed by a Republican administration and endorsed by Republican Presidential candidate John McCain, only one third of House Republicans backed the bill. One could expect partisan infighting to cause a massive “nay” vote from the Democrats, but they largely endorsed the package – Democratic Presidential candidate Barack Obama also supported the measure. Of the 235 voting Democrats, 140 voted in favor of the bill. Of the 198 voting Republicans, only 65 voted in favor of the bill (see: results).

In recent days, Representatives have been flooded with calls, emails and letters from outraged constituents urging them not to vote for the bailout package. Average Americans are feeling the brunt of the reeling economy, and they found it very difficult to sympathize with the pains of millionaire Wall Street executives. Despite fear-mongering by both parties, the American people simply could not back a plan which bailed-out the bad decisions of investment bankers while leaving them with nothing to show for it.

Many House seats in the upcoming election are hotly contested between Washington incumbents and local challengers. By supporting a bill which is largely derided by the American people, any Representative running in a close race would seriously jeopardize their reelection. The New York Times provided a graphic of the U.S. that detailed how every individual representative voted on the issue.

The failure of the bailout package is good for the economy and more importantly it is good for the entire democratic process. The institutions which helped to undermine our entire financial system through corruption and market manipulation should pay for their actions. The average taxpayer should not have their hard earned money – over $2,300 for every man, woman and child – taken away for a cause which will likely show them no tangible return.

Furthermore, by voicing their outrage with the financial system, the voters of this country showed they have the ability to unite for a just cause. Congress tried to strong-arm this bill through the House of Representatives before major opposition could be raised. Members of Congress should be directly responsible to their constituents. Regardless of the merits of this or that position, the people are supposed to have the power of choice in their own government.

The failure of the bailout sent shockwaves through Wall Street as the Dow Jones Industrial Average fell nearly 778 points – by far the all-time record for a single trading session. Some members of Congress have said that the fallout from their votes offered proof of the necessity of the package. It is just as likely that it showed the lack of confidence in the market and that it was more representative of the true value. Stocks had been climbing for several days as the package seemed to gain steam in the House. This drop did little more than erase the artificial advances of last week. People put their money into the markets expecting the government to rescue them from their bad debts, as would have been the case if the package passed. When it was revealed that there would be no such rescue the new money exited as quickly as it entered.

Source Fortune:

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