Monday, January 12, 2009

How Republican "assholes" caused stock market crash

(And destroyed my 401K.) More from the New Yorker profile on Barney Frank.

Frank laid out the provisions that the Democrats wanted in a bailout bill: equity for the taxpayers, like any other investors; a program to limit foreclosures for beleaguered homeowners; compensation reform for executives at companies receiving bailout funds; and strict congressional oversight of the whole process. Two days later, on Saturday, September 20th, the Treasury Department sent Congress a formal proposal of sorts. In a text just three pages long, the Treasury asked for seven hundred billion dollars from Congress but provided few details about how the Administration would spend the money. “It was just ridiculous,” Pelosi told me. “They wanted us to surrender all authority and give them seven hundred billion dollars.”

Throughout the weekend, Frank and Chris Dodd, the Democratic senator from Connecticut and the chairman of the Senate banking committee, worked with colleagues in both parties to come up with a plan that they thought could win widespread support. The following Wednesday, September 24th, John McCain, the Republican Presidential nominee, announced that he was suspending his campaign and returning to Washington to address the crisis. Although McCain had played no part in the negotiations, the White House promptly scheduled a meeting of the President, the congressional leadership, and the two Presidential candidates for the following afternoon, Thursday, September 25th. By this time, a deal seemed to be in place. Congressional leaders announced that they had agreed in principle to an amended version of the Administration’s bailout proposal. Before the meeting, the Democrats at the White House, including Frank, Pelosi, and Barack Obama, had caucused privately in the Roosevelt Room about their strategy for the day. “Barack said, ‘I think we need to go ahead with this,’ ” Frank recalled. “He was being conciliatory, because he thinks it’s very important for us, both in public policy and politically, that we don’t get blamed for fucking up the economy. And that we not fuck up the economy.”

The meeting with the President nearly destroyed the good will that had been generated during the previous week. John Boehner, the Republican leader in the House, expressed disapproval of the proposal, arguing that it did not reflect a bipartisan consensus. Frank tried to put McCain on the spot: would he back the House Republicans or Bush and the rest of the congressional leadership? As Frank recalled, “I said, ‘John, what do you think?’ ‘Well, I think the House Republicans have a right to their position.’ ‘Fine. You agree with that position?’ ‘No, I just think they have a right to their position.’ He looks like your old uncle, just shrivelled and shrunk, and he just didn’t look good. And we kept pressing him, saying, ‘What is your plan?’ ” McCain wouldn’t say.

“The protocol is you’re not supposed to talk to the President directly,” Frank said. “We just ignored that.” But the President didn’t bring the group together, and the meeting ended without a decision. The Democrats returned to the Roosevelt Room to plot their next move, and Paulson joined them. As Frank recalled, Paulson “literally drops to the one knee” and begged Pelosi to bring the bailout up for a vote in the House, despite the Republican opposition. “But we start yelling at him,” Frank said. “ ‘Jeez, work on your assholes over there—your guys. I mean, you know, we’re trying to do it, and your guys are playing games.’ ”

Two tumultuous votes in the House followed. On September 29th, the bailout was unexpectedly defeated, 228–205, and the Dow Jones Industrial Average plunged seven hundred and seventy-eight points. . . .

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