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Tsongas, Tierney on opposite sides of the bailout bill

Congress nixes Bush plan; Wall Street crashes

By Bill Kirk
bkirk@eagletribune.com
Published: September 30, 2008

The two members of Congress who represent the Merrimack Valley — Niki Tsongas and John Tierney — mirrored the national mood by being on opposite sides of the massive Wall Street bailout vote yesterday.

By a vote of 228-205, Congress rejected a bill that would have spent $700 billion in taxpayers' money to buy bad mortgages from ailing banks and hold on to them until the banks could regain their financial footing.

Joining 92 other Democrats and 133 Republicans in voting against the bill were U.S. Reps. Paul Hodes and Carol Shea-Porter from New Hampshire.

Two other members of the all Democratic Massachusetts delegation voted against the bill, William Delahunt of Quincy and Stephen Lynch of Boston.

The plan is being promoted by the Bush administration as a critical step toward saving the economy from recession, depression or worse.

Defeat of the bailout prompted the largest, single-day point drop in the history of the stock market.

According to preliminary calculations, the Dow fell 777.68, or 6.98 percent, to 10,365.45. The decline also surpasses the 721.56-point one-day decline record set during the first trading day after the Sept. 11, 2001, terrorist attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.

Tsongas, a first-term Democrat from Lowell, said the goal of the failed bailout bill was to prevent a catastrophic hit to the nation's economy.

"As we go forward in the next day or two, we will see how broad-based the impact is," said Tsongas, who represents the 5th Congressional District. "Since we didn't pass the bill, the stock market lost $1 trillion in value in just a few hours. The impact is very dramatic and quite serious."

Tierney, a Salem Democrat whose 6th Congressional District includes Haverhill, North Andover, Boxford, Georgetown, Groveland, Amesbury, Merrimac and Newburyport, issued a statement that he opposed the legislation because it didn't do enough for the average taxpayer.

"There were compromises made in this version of the bill, ostensibly to gain bipartisan support," he said. "Unfortunately, such compromises were made at the expense of key priorities — investment in helping homeowners, protections to ensure that the taxpayer will not have to absorb the full cost, and incentives to get the economy back on track.

"This bill can be improved, and a different approach can be taken. We expect to continue reviewing this matter as the week progresses."

Tsongas said she didn't know why the bill failed and that it would take a few days to figure that out, but she was quick to blame Republicans for not supporting it, even though 65 Republicans joined 140 Democrats in support of the bill. The next step, she and others in the legislative delegation said, would be to craft a new bill over the next few days to stave off economic disaster.

Part of that process will no doubt include input from the White House, where Bush and his advisers, including Treasury Secretary Henry Paulson, said the bailout was needed so that banks would start lending again. They said that as long as banks aren't lending, large businesses won't have access to the cash they need to meet payroll and other short-term expenses, which could lead to millions of layoffs, further dampening a struggling economy.

Tsongas said that not only will big businesses be affected, but individual investors, particularly the elderly on fixed incomes who rely at least partially on stock dividends to make ends meet, will be hurt by the downward spiral in the stock market.

In addition, people looking for college loans, first-time home buyers, and even people who need to buy a new car, may also be affected by the frozen credit markets.

"If this had simply been about Wall Street, you would have seen a very different response from us," Tsongas said. "I was persuaded by Henry Paulson, Federal Reserve Chairman Ben Bernanke and economists on both sides of the political aisle that this would address the impact on the taxpayer as seriously as the impact on Wall Street."

She said the original legislation proposed by Paulson last week didn't do enough to protect the taxpayer, but that a reworked bill — the one rejected yesterday — did.

"It was a good bill, not a perfect bill, and we had reservations about it," she said.

Now, Tsongas, who doesn't have an opponent in the November election, will stay in Washington, D.C., to continue working over the next several days on a new bailout bill.

"Our commitment is to stay, go forward, and come to a bipartisan solution," she said.

Hodes, D-N.H., who voted against the bill, said in a conference call with reporters yesterday that he listened to his constituents.

"This was no doubt a difficult vote," he said. "In the end, it was a vote in the best interests of the state of New Hampshire."

He admitted that there were risks both of acting and not acting on the bailout bill, which he said was a short-term fix for a long-term problem.

"We contemplated, in the short-term, a significant drop in the equity markets," he said. "In the long-term, we will rebuild the economy. It will be done and we will be successful."

He said that in the interim, the U.S. Treasury and Federal Reserve have the capability to stabilize markets by injecting billions of dollars into the system to spur lending by the big banks.

Shea-Porter voted against it because she didn't want to give so much power to Paulson.

"If the bill had passed, the secretary of the treasury would have had absolute authority to decide which securities to buy, from whom to purchase, and how much to pay. The secretary of the treasury would have also had absolute authority to decide who he would hire to manage the assets he purchased.

"More than 400 economists, including three Nobel laureates, appealed to Congress to slow down and make sure we got this right. Congress took about eight months to draft and pass the legislation establishing the Resolution Trust Corporation — and this only involved about $100 billion of taxpayer money. Certainly, Congress needs more time than one week to invest $700 billion of taxpayer money in a bailout.

"American taxpayers need a better bill, a better plan, and better protection. That is why I voted to stay in Washington and continue working on this bill. That is why I voted against this bill."