House Rejects Bailout and Stock Market Reacts, Dow Down 777.68

US Markets React During Vote

As votes were registered and mid-count the tide seemed to turn, the US stock market immediately reacted, sending the Dow down 500 points as votes were being cast--ending the day down 777.68 points, nearly 7%.

Weekend Marathon Appeared Bi-Partisan

Throughout the weekend as the $700 billion market stabilization bill ballooned from 2 pages to 110 pages public statements seemed to indicate bi-partisan consensus. All the while President Bush and Secretary HankPaulson continued to emphasized the sense of urgency to give the markets a plan by Monday.

A plan was presented; however, the outcome seemed to shock everyone from Congress to Wall Street.

House members seem to be registering some support to reconsider the vote, but no formal measure has come to the floor.

Republicans Cite Pelosi's Speech

Statements by House Minority Leader John Boehner (R-OH) indicated a willingness to bring a new bill with further revisions. Yet, when pressed to reveal if it would be based on the originalPaulson proposal he admitted, "I am not certain anyone knows the path from here."

Some Republicans like Eric Cantor (R-VA), lay the failure of the bailout bill at the feet of House Speaker Nancy Pelosi in giving what was perceived and labeled as a partisan speech. Representative Cantor stated that "Speaker Pelosi's failure to listen [and] failure to lead," soured many on the bill in the final moments before the vote.

Vote Splits Both Parties

Regardless of a potentially partisan speech attacking the current Administrations management of the economy the facts seem to point to a broader source of rejection. Both parties, Democrat and Republican were obviously split by the legislation, each leaving around one hundred votes behind.

Politics and reelection seemed to be the largest fear. The "Nays" seemed very clearly a list of Congress persons battling for reelection. This legislation, asking taxpayers for $700 billion, polls very negatively with most voters.

However, outside of politics there were also fundamental flaws that left parties from both sides behind. Democrats, during the pre-vote debate, often cited a lack of consideration of the homeowner. While Republicans stood opposed on to the hypocrisy of abandoning our free market principles.

Now What?

The failure of this bill now sends Congress scrabbling for another solution. With the Jewish holiday of Rosh Hashanah running through Wednesday no substantive movement is expected before later this week.

Meanwhile, Treasury Secretary Paulson says that this failure reduces his tools to deal with the crisis that still remains with us. Forced to continue to fight fires and address individual institutional problems versus working in a systematic way.

Other more optimistic opinions think that this historic failure may force Congress and the Administration to slow down and work towards more appropriate measures. However, as the Nikkei closes down 4.5% and US markets set to open in a few hours many will question the markets' fortitude.