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Lou Dobbs Tonight
Bailout Plan Rejected
Aired September 29, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, HOST: Tonight, a stunning setback for the Bush administration and the Democratic congressional leadership and an outright victory for the American people, the House of Representatives refusing to support that $700 billion Wall Street bailout. We'll have complete coverage and we'll be reporting to you on today's huge sell- off on Wall Street.
And tonight, is anyone in Washington looking after the interests of our working men and women and their families, our middle class? We'll have a special report on the refuse of political and financial elites to help our working men and women.
And the presidential candidates blaming one another for the failure of the bailout plan without offering any new ideas or any ideas as to why they supported it in the first place; all of that, all of the day's news and much more from an independent perspective straight ahead here tonight.
ANNOUNCER: This is LOU DOBBS TONIGHT: news, debate, and opinion for Monday, September 29th. Live from New York, Lou Dobbs.
DOBBS: Good evening, everybody. The House of Representatives today firmly rejected the idea of giving Wall Street a bailout that would cost taxpayers a trillion dollars, many Republican and Democratic congressmen defying the White House and the Democratic leadership to vote against that bailout. The bailout was defeated by a margin of 228-205.
Congressmen immediately deciding to reconvene Thursday, however. After that vote the stock market plummeted, the Dow Jones industrials, which had been down 300 points before the vote, lost almost 800 by the close, the biggest decline in history in terms of points. We have extensive coverage tonight. We begin with where it all began, with Jessica Yellin on Capitol Hill -- Jessica.
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Good evening, Lou. Folks here on the Capitol are -- say they are still working on trying to figure out how they can rescue this financial rescue legislation that went down in flames today in the House of Representatives. As you said, members are blaming each other for the failure of this bill.
Democrats saying people's 401 (ks) have lost value, their money market accounts have lost value and they say it's all because a few House Republicans just refuse to get on board with what they're calling a bitter, but essential pill for Congress to swallow. Republicans are saying no, they didn't get the votes not because of philosophical differences or because of the substance of the bill, but rather because of these comments by Nancy Pelosi. Let's listen.
(BEGIN VIDEO CLIP)
REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: Democrats believe in a free market. We know that it can create jobs. It can create wealth. It can create many good things in our economy. But in this case, in its unbridled form, as encourage supported by the Republicans, some in the Republican Party, not all, it has created not just -- not jobs, not capital, it has created chaos.
(END VIDEO CLIP)
YELLIN: Well, Lou, you might ask, why those words would cause a bill, a rescue plan, to go down. They say Republicans, that those comments by Nancy Pelosi were just too partisan and that they angered some Republicans so much that they couldn't get them to vote yes on this bill. They're blaming Nancy Pelosi for sending the bill down in flames. Here is what they had to say after the vote failed.
(BEGIN VIDEO CLIP)
REP. ERIC CANTOR (R), VIRGINIA: Right here is the reason, I believe, why this vote failed. And this is Speaker Pelosi's speech that frankly struck the tone of partisanship that frankly was inappropriate in this discussion.
REP. JOHN BOEHNER (R-OH), MINORITY LEADER: We've put everything we had into getting the votes to get there today. But the speaker had to give a partisan voice that poisoned our conference, caused a number of members who we thought we could get to go south.
REP. BARNEY FRANK (D), FINANCIAL SVCS. CHMN.: We don't believe they had the votes and I think they are covering up the embarrassment of not having the votes. There were 12 Republican members who were ready to stand up for the economic interest of America but not if anybody -- suddenly I'll make an offer. Give me those 12 people's names and I will go talk uncharacteristically nicely to them...
(LAUGHTER)
FRANK: ... and tell them what wonderful people they are and maybe they'll now think about the country.
(END VIDEO CLIP)
YELLIN: That last speaker there Lou, of course was Barney Frank, a Democrat, who has championed this bill and he essentially mocking the Republicans for suggesting that this bailout failed simply because of some unpleasant words by Nancy Pelosi. So, if you want to know what's next, next they're going to try to figure out how to get this thing through, maybe sending it to the Senate first, maybe renegotiating, at this moment, no one is quite sure -- Lou. DOBBS: Well Jessica, help me out here. Maybe I'm a little confused on very, very complicated mathematics. But it seems to me that with the majority in the House of Representatives, it's a bit disingenuous for Barney Frank or Nancy Pelosi or Steny Hoyer to be blaming Republicans. All they had to do was assemble their majority and push this through. Why is the national media letting them play these silly games? In point of fact, this should be squarely resting on the majority in Congress and that's a Democratic majority.
YELLIN: Well, the simple answer is that this was a proposal from the White House, it was a Bush administration initiative, to begin with, and the Democrats feel they must have a bipartisan bill in order for this to fly. They don't want to take sole responsibility if this bill becomes a problem. So they're looking for Republicans to sign on as well. That's why they worked hard to get a negotiated bipartisan bill.
DOBBS: Jessica, if I may, that seems to be an artifice, a convenient one for the Democratic leadership, but the reality is more than 60 Democrats voted against the bailout, so it seems rather them talking nicely to 12 Republicans, Barney Frank might consider talking nice to some 60-some odd Democrats.
YELLIN: Well you hit the nail on the head, Lou, and one of the proposals or the ideas I've heard from Democrats is that if the Republicans don't want to come along, they will -- the Democrats will rewrite this bill as a bill that's very pleasing to the Democrats that includes bankruptcy protections and all sorts of consumer protections to help families and Democratic voters which Republicans won't like at all, but will get all of those Democrats signed on and they might try to shove it down the Republicans' throat.
DOBBS: Well I've got a forecast to make and I'll venture one of my forecasts if I may, Jessica. After all of these Congress men and women get back from their home districts, I'll guarantee you the Democrats won't be passing any such legislation with any such elements in it. Thank you very much, Jessica Yellin.
Well the stock market today plummeted nearly 800 points, its worst point decline in history, a decline of seven percent, which is not its worst decline. The market sell-off wiped out more than a trillion dollars in shareholder value. Crude oil prices today also plummeted, however, as traders worried about the worsening economy.
Crude oil prices down more than $10 a barrel, closing at $96 a barrel. And further evidence of the problems facing our economy, Citigroup today bought the banking operations of Wachovia for just $2 billion. Wachovia had been on the verge of collapse as a result of the mortgage crisis. And in Europe, governments today rescued two major banks, one in Great Britain, the other in Belgium and the Netherlands and two others besides.
Well President Bush today declared he is disappointed by today's vote. The president promised to tackle this crisis head on, as he put it, President Bush holding urgent talks with top officials including Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. Paulson said, quote, "we need a plan and we need it as soon as possible."
(BEGIN VIDEO CLIP)
HENRY PAULSON, TREASURY SECRETARY: I am committed to continuing to work with my fellow regulators to use all of the tools available to protect our financial system and our economy. Our tool kit is substantial but insufficient.
(END VIDEO CLIP)
DOBBS: Makes you wonder what he's been doing for the past nine days -- Elaine Quijano now reporting from the White House -- Elaine.
ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, Lou, this is a stinging defeat for President Bush, delivered in large part at the hands of his own Republican Party just days after the president warned that a long and painful recession could come upon the country, if Congress doesn't act immediately. Including some urgent pleas, including one this morning I should say, an urgent plea to act. Mr. Bush was ultimately unable to get members of his own party to fall in line.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I was disappointed in the vote with the United States Congress on the economic rescue plan. We put forth a plan that was big because we got a big problem. I'm going to be talking to my economic advisers after my meeting here with the president. And we work with members of Congress, leaders of Congress on a way forward.
(END VIDEO CLIP)
QUIJANO: Now, after the vote, the president did huddle with his top economic advisers, as you noted, including Treasury Secretary Henry Paulson who, again, insisted Congress must act soon. The Treasury secretary saying there's turmoil in the markets and pointed most recently to the examples of Washington Mutual and Wachovia as evidence, he said, that Congress does need to act as soon as possible -- Lou.
DOBBS: All right, Elaine, has Secretary Paulson or anyone at the White House suggested what the result will be, how strongly will the economy grow if this rescue, so-called rescue package, this bailout, were to be passed? I mean have they put any numbers on that?
QUIJANO: It's an excellent question, Lou. They have not to answer your question. The other question that remains to be answered, I actually posed to Secretary Paulson today when he was here at the White House talking to reporters, is how long does the country actually have before it falls into this recession that President Bush warned about just days ago in his prime time address?
He did not have an answer, again just talking about the need to act urgently. And as you know, Lou, it is that kind of pressure that some lawmakers on Capitol Hill are not reacting well to -- Lou. DOBBS: Elaine, thank you very much -- Elaine Quijano. And also as we should point out, various experts and economists have been talking about this country being in recession for the past nine months in point of fact.
Well Senator McCain today accused Senator Obama and other Democrats of putting politics ahead of country. Senator McCain said Obama introduced unnecessary partisanship into the bailout fight. Ed Henry has our report from Washington. Ed, tell me it's not true, no partisanship, please.
ED HENRY, CNN WHITE HOUSE CORRESPONDENT: No, absolutely not, Lou. Unfortunately, I have to tell you that there were charges of partisanship. I know you're shocked by that, but essentially Senator McCain, as you know, is a tough defeat for him. He put a lot of political capital on the line over the last few days and really raised the stakes for himself last week in New York when he sort of abruptly announced that he was suspending his campaign.
He was heading back to Washington. He was going to sort of try to ride to the rescue and get some sort of a compromise through Congress. He spent Friday and through most of the weekend was here in Washington, trying to show that he could work with colleagues and Congress, both in the House and in the Senate, but specifically those House Republicans who were not coming along and try to convince them to support this. Since this is a defeat for him, he's now trying to get off defense and play offense by turning the blame around on Barack Obama and that's exactly what he did in Des Moines, Iowa, today.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I call on Congress to get back, obviously, immediately to address this crisis. Our leaders are expected to leave partisanship at the door and come to the table to solve our problems. Senator Obama and his allies and Congress infused unnecessary partisanship into the process. Now is not the time to fix the blame. It's time to fix the problem.
(END VIDEO CLIP)
HENRY: So what the McCain camp is trying to say is that when he first got involved last week there were media reports suggesting there were only four House Republicans on board with this bailout plan. Today there were 65 House Republicans who voted for it. So the McCain camp is trying to make the case that at least many of those 61 House Republicans who came along, came along because of his lobbying efforts. But the bottom line is that in the end even though 65 Republicans supported it, 133 opposed it and so Senator McCain was not able to bring enough along -- Lou.
DOBBS: Well again, in point of fact we have a situation in which Senator Obama and Senator McCain are mirror images of one another. They both want this bailout and they keep talking about blame, both of them, in point of fact in my opinion, they should be talking about credit for stopping this $700 billion Wall Street bailout, really remarkable. Apparently Senator McCain and Senator Obama are seeing it obviously quite, quite differently. Thank you very much, Ed Henry.
Well Senator Obama today hammering Senator McCain. Being a little partisan, saying the nation can't afford McCain's economic policies. Obama said McCain had fought against what he called common sense regulations for decades. As Suzanne Malveaux now reports from Denver, Obama also declared he supports the bailout.
(BEGIN VIDEOTAPE)
SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Get this done. Democrats, Republicans step up to the plate, get it done.
SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): Barack Obama called for Congress to break the gridlock and pass a bailout bill. After being briefed by Secretary Paulson and House Speaker Nancy Pelosi about the failed vote, Obama sought to reassure the nation.
OBAMA: Now's not the time for fear. Now's not the time for panic.
MALVEAUX: He also used the crisis to blast President Bush and John McCain over the Republicans' economic policy.
OBAMA: This is the consequence of eight years of irresponsibility. And it is time we had some adult supervision in the White House. They wanted to let the market run free, but instead they let it run wild.
MALVEAUX: Obama said he would have reluctantly voted yes for the failed (INAUDIBLE) $700 billion plan because it contained the kinds of protections for taxpayers and homeowners he'd been demanding.
OBAMA: This administration started off by asking for a blank check of $700 billion to solve the problem.
UNIDENTIFIED GROUP: (INAUDIBLE)
OBAMA: And I said absolutely not.
MALVEAUX: Instead, Obama made a big promise to voters.
OBAMA: If I am president, I will review the entire plan on the day I take office to make sure that it is working to save our economy and that you get your money back.
MALVEAUX (on camera): Whether the majority of voters believe that is still an unanswered question. And the answer may very well determine who becomes president.
Suzanne Malveaux, CNN, Denver, Colorado.
(END VIDEOTAPE)
DOBBS: In other words, it's very simple. There isn't any difference between Senator Obama and Senator McCain. They both support the Wall Street bailout.
Well time now for our poll. The question to you is do you believe today's congressional vote against Wall Street, the Wall Street bailout is a victory for the American people and a rejection of the attempted extortion by corporate and political elites? Yes or no. Cast your vote at LouDobbs.com with apologies to both Senators Obama and McCain. We'll have the results here later.
Much more now on the political and economic impact of the Wall Street bailout vote, some of the finest political and economic thinkers in the country join me.
And America's forgotten middle class, political and economic elites selling out working men and women and their families, you know some them the same folks who said they should be representing them.
And at least this day we had some representation in Washington, D.C. Tonight, new evidence of Senator Obama's links with one of the groups that encouraged the reckless lending behind this crisis. We'll have that special report as well and much more. Stay with us.
(COMMERCIAL BREAK)
DOBBS: The House of Representatives today rejected the Bush administration's call for a massive $700 billion Wall Street bailout. Some lawmakers said that plan does little or nothing to help millions of homeowners facing foreclosure. Casey Wian has our report.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): In California, nearly 1,300 homes are being foreclosed every business day. Statewide, more than half a million homes are under foreclosure. In the second quarter of this year, 121,000 homeowners in the once Golden State received default notices and California home prices have plunged 41 percent since last year. Not surprisingly, one of the leading legislative critics of the Bush administration's bailout plan is from California.
REP. BRAD SHERMAN (D), CALIFORNIA: This will do very little, perhaps nothing, to help people with troubles paying their mortgage.
WIAN: Nationally, 7.5 million homeowners now face foreclosure, another five million have zero or negative equity in their homes. The president and his Wall Street supporters say the plan would help homeowners.
BUSH: The assets related to home mortgages that have lost value during the housing decline, under the emergency economic stabilization act, the federal government will be authorized to purchase these assets from banks and other financial institutions, which will help free them to resume lending to businesses and consumers.
MARK ZANDI, MOODY'S ECONOMY.COM: The idea here is that the federal government would take ownership of these mortgage loans and then it has some options and it could work to keep people who are in foreclosure in their homes.
WIAN: Or not. A group called Vote No Bailout says it has sent 170,000 letters to Congress warning the legislation does virtually nothing for the millions of hard-working people who have lost their homes or are now facing foreclosure. Instead of rewarding bankers' greed, the group says, homeowners should receive the same opportunity as Wall Street to restructure their deals.
About 12 percent of the two million mortgages now under foreclosure were written for homeowners with bad credit or with little or no money down. Two years ago, sub prime borrowers accounted for 20 percent of home loans, now nine percent of the nation's 75 million homeowners are either behind on their mortgage payments or in foreclosure.
(END VIDEOTAPE)
WIAN: Critic says the proposed bailout seeks to protect those who made the loans and should have known better, but not the homeowners who often didn't understand what they were getting into -- Lou.
DOBBS: Casey, thank you very much -- Casey Wian.
Well one of the groups at the center of this financial crisis is a so-called community activist group known as ACORN. In point of fact, ACORN is a left wing special interest group now under investigation for embezzlement, voter fraud and providing mortgages to illegal aliens among other things.
The group ACORN lobbied Congress for years to allow more of those risky mortgages that in part led to this crisis. And now, ACORN stands to reap hundreds of millions of dollars from a government bailout of Wall Street. Lisa Sylvester has our report.
(BEGIN VIDEOTAPE)
UNIDENTIFIED GROUP: (INAUDIBLE)
LISA SYLVESTER, CNN CORRESPONDENT (voice-over): ACORN, the Association of Community Organizations for Reform Now rallied in front of the Miami Federal Reserve Bank. The group is pointing fingers at Wall Street for causing the financial meltdown. But critics say this community activist group shares the blame.
TOM DILORENZO, ECONOMICS PROF., LOYOLA COLLEGE: They've always lobbied Congress to do everything they could to make more and more or force banks to make more and more loans to low and moderate income people, which is a very noble-sounding goal. But unfortunately they have contributed to the financial ruination of thousands of low income families.
SYLVESTER: It goes back to something known as the Community Reinvestment Act that passed in 1977. The law ordered banks to make loans to low and moderate income people. The Consumer Rights League says ACORN stepped in and used that law to pressure banks to lend to sub prime borrowers, even those who couldn't demonstrate the capability to pay back the loan.
JAMES TERRY, CONSUMER RIGHTS LEAGUE: Back in the early '90s they would stage protests at banks that, you know, they sued them for red lining. They (INAUDIBLE) engaged them in legal action.
SYLVESTER: Enter deregulation in the '90's then Fannie Mae and Freddie Mac began purchasing these mortgages and selling them to private investors. And the sub prime market took off. Former Clinton administration official Franklin Raines, who ran Fannie Mae amassed $90 million in six year he ran Fannie. Homeownership was up which pleased groups like ACORN and Wall Street made a ton of money until home prices started falling. But ACORN says it's not to blame. It's all about greed.
AUSTIN KING, ACORN: When you look at all the bad sub prime loans that were made in the last five years, three out of four of them were made by institutions that are not governed by the CRA, so there's no way you can blame the CRA on 75 percent of the sub prime loans that were made in the last five years.
(END VIDEOTAPE)
SYLVESTER: And ACORN which calls itself the nation's largest grassroots organization of low and moderate income families, has come under fire for other issues. At least five states have opened investigations into its voter registration drive. And ACORN employees have been convicted of voter fraud. Still, this group, as you mentioned, stood to benefit from the bailout deal and part of any profit realized from the sale of troubled assets were to go into a fund and that money would be distributed to low income housing advocacy groups including ACORN, Lou.
DOBBS: Now think about this, in the midst of this -- you know everyone talking about a clean bill and the Democratic leadership, let's be clear. This is a straightforward deal for ACORN and other groups, left wing groups, set up by the Democratic leadership of Congress. They're not interested in the bailout per se. They want to spread this out and many people believe that this bailout in part is dear to the Democratic leadership because they want to advance a social agenda here as much as much as an economic bailout of Wall Street.
SYLVESTER: Yeah, Lou, in fact what they did is in prior legislation they actually created these two funds. And now essentially what thy were going to do is try to use this bailout to fund and put money in those funds in order to benefit groups like ACORN and in order to advance some other causes as you mentioned including their voter registration drive, Lou.
DOBBS: It's -- this is pitiful in the fact that, of course, this Congress is fully supportive of this nonsense is all the more disgusting, so voters right now, all of us as citizens have a lot to be disgusted with on Capitol Hill. Thank you very much, Lisa -- Lisa Sylvester reporting.
Up next, what may be the clearest sign yet that this bailout for Wall Street puts the interest of business ahead of the people. The Chamber of Commerce and the business round table, where are they? Are they working behind the scenes because they're sure not out in the public. They support it wholeheartedly. We'll be telling you about that.
And later I'll be joined by three of the brightest economic minds in the country. We'll be talking about the market sell-off today and that little bailout thing. Stay with us. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Today's congressional vote was an outright victory for the American people and a surprising defeat for the lobbyists and business special interests those groups fighting against government regulation for years while this crisis built. And they backed this bailout of Wall Street that would have given their clients, of course, a lot of money. Bill Tucker has our report.
(BEGIN VIDEOTAPE)
BILL TUCKER, CNN CORRESPONDENT (voice-over): The U.S. Chamber of Commerce fully supports the bipartisan financial rescue plan, calling on Congress to finalize it, pass it, and present it to the president for his signature, as soon as possible. The Chamber has spent nearly $400 million in the last 10 years lobbying Congress making it the number one lobbyist in Washington. While it advocates for a bailout that could potentially benefit its business membership, it did almost nothing to warn Congress it needed to wake up and pay attention.
A spokesman for the Chamber says it was active in calling for regulatory reform, but when asked to provide examples of those calls, he didn't, and turned down a request for an interview. The Business Roundtable, number nine on the 10-year lobbying list with more than $112 million spent, also fully supports the bailout.
The Roundtable calls passage crucial to our financial well-being. All told, the two groups represent a half a billion dollars in lobbying power and business influence. The Business Roundtable and Association of Chief Executive Officers has also been virtually absent in using their lobbying power to sound a wake-up call to Congress.
We also spoke with the Roundtable, who like the Chamber of Commerce, say they called for regulatory reform, but also failed to provide examples of that activity and also declined a request for an interview. Some in Congress think that while they have been absent in the past, they should get involved now.
REP. THADDEUS MCCOTTER (R), MICHIGAN: Now the reality is at this point in time, now that the American people have said no to the Paulson bailout, it is time for these groups to step up to the plate, work with Congress towards a responsible solution to this situation.
TUCKER: Of course, there are those who question whether the interests of big business can ever be aligned with the American people.
(END VIDEOTAPE)
TUCKER: Officials at the American Small Business League, in particular, are critical of the U.S. Chamber of Commerce, saying they have failed and are failing to represent the interest of the small business man and woman in the country and the interest of ordinary Americans. Lou we said this over and over again, it's worth saying again, it's small business that creates 75% of the jobs in this country.
LOU DOBBS, CNN ANCHOR: Or more. One of the things, it's not discussed a lot Chamber of Commerce and one of the great complaints in the chamber itself and membership, small business understands they're representing the interests of big business or multi nationals, not they're interests. And the idea that these two, you know, these two institutions, the business round table and the U.S. chamber of Commerce, I'm pro-business but these two -- these two associations -- and I'm pro-labor -- you can't do that in America, that's the way it works. The Chamber of Commerce won't recognize that nor the round table or perhaps they FALCIL for that matter but I don't care.
The reality is that these two organizations are working against the American people and have been for some time and haven't got the guts to come on the show and talk about the issues. They are behind the scenes stifling the voice of American business. Think about the last time you hear a CEO step up in front of a camera and mike actually express himself or herself on any issue of great public policy importance and it's disgusting that these associations are just really -- they're cloaks, they're veils, for the self-influence of business. It's a shame.
But you know, I just got to go back to it how great for the American people that congress listened to them and voted against this bailout of Wall Street? I mean, folks we should be celebrating. I know we all lost a little money or a lot of money but you know, I've said this before, I don't care if I lose every nickel. If we can roll back the influence of these people in Washington, D.C., I'll be glad to lose every nickel.
Bill Tucker, thanks a lot. Appreciate it.
Coming up next, a massive sell-off on Wall Street, complete vacuum of leadership in Washington. The former is new, the latter has been around for a while. Next, I'll being talking with three of the best economic thinkers in the country and stunning victory for you, me, our fellow citizens. Will our political elites finally surrender? Three top political analysts join me next here as well. Stay with us. We're coming right back.
(COMMERCIAL BREAK)
DOBBS: Join me for the victory of the American people and the defeat of the $700 billion wall street bailout, three of the leading authorities in the economy, in our Washington, D.C. bureau, Professor Peter Morici, the Robert H. Johnston School of Business at the University of Maryland, good to have you with us; in Rochester, New York Pulitzer Prize winning journalist, former New York Times reporter, David Cay Johnston, author of "Free Lunch How The Wealthiest Americans Enrich Themselves At Government Expense" and here in New York City, Charles Calomiris professor of finance and economics at Columbia University School of Business.
Let's start here. This bailout, is it as bad an idea as many think it is?
PROF. CHARLES CALOMIRIS, COLUMBIA UNIVERSITY: Well, the idea of intervening somehow to do something positive to prevent the credit crunch from spread, I think, is a good idea. But I think we can get happy compromise somewhere in between you're losing every nickel and you're paying every dollar. My view is the plan started in the wrong place. That by having taxpayer as sum the risk of buying as sets it put them in a first lost position. I think we should use the historically tried and true method of having the government lend in a protected way to banks to give them the breathing room to restart the credit process and that just never got to the starting line, the real scandal here, Lou, we didn't have a moment of testimony by any experts before congress acting independently to tell congress anything about how these things have been done in the past.
DOBBS: That's the arrogance of certainly the Bush administration, but that's something we're used to, whether it be this administration or any other. But the ignorance of the leadership of this congress, not to demand those hearings I can't even begin to understand.
Professor, I have to say, I feel awfully good about this vote today. I swear to you, I have got a very warm and comfortable feeling, even after all of the money lost in the stock market, that we're on the path to the right -- to right course.
PROF. PETER MORICI, UNIVERSITY OF MARYLAND: Well, absolutely. The signal sent to Wall Street, the gravy train is over. If they're going to get help, whether through lending or by us buying up bad securities they have to pay for it. We're going to have to have real compensation reform. Time to take Vikram Pandit and the rest of them down to size from $65 million a year to the CEO at General Motors gets.
The American people deserve equity participation in this deal if they're going to take back this bad paper. Right now it's a heads they win, tails we lose. If we give them money we ought to get warrants and equity participation which this bill didn't provide and finally, the New York banks have exited the commercial lending business. They're no longer underwriting the loans of small regional banks, that's why there's a credit shortage in the country. If they get money they have to agree to be banks. After all, that's why we're shoring them up.
DOBBS: Well, you know, that's an interesting point and one I don't think many people, David are focusing on. These money center banks have becoming aggregators of deposits and not in the lifeblood of smaller communities in by -- from which they are aggregating these deposits. DAVID CAY JOHNSTON, AUTHOR, "FREE LUNCH": No, and the more we concentrate banks and have less competition the worst that will get. One of the things that slipped by in the news today that is city bank is buying Wachovia, the fourth largest bank in the country. If we have a problem with firms that are too big to fail, this is going in the wrong direction. We -- by the way, Lou, I'm with you, whether you believe we should have a bailout or not, this was a great day for democratic government because congress was responding to the people instead of donors.
DOBBS: Absolutely. And this issue of too big to fail, again, here we are watching the concentration of commercial banking in this country. That's un-American. This is a -- this is a trend that is really turning banging on its head. It may be the continuation of a trend but it's a continuation, in my judgment, and historically we can demonstrate this, a very bad trend. And at the same time to combine this with a taxpayer bailout of the institutions? Surely, professor, we have embarked on a course that we have to reverse.
CALOMIRIS: I think it's a major problem. The fact that an institution can come to the government and say, we're so big that you can't live without us is a great threat to the taxpayers. I would say, there is a silver lining to some of the crisis so far which is, remember that the Bear Stearns stockholders and management didn't get to retain their management control and got only ultimately $10 a share, AIG stockholders lost 80% of the firm, Lehman got wiped out. We did get some examples here, although it's true that we have a worrying amount of consolidation at top go on right now, we did get some examples of stock holders and managers who suffered gravely who didn't get bailed out.
DOBBS: We'll be right back with our panel in just a moment. But first a reminder to vote in our poll.
We'd like to hear from you on the question, do you believe today's congressional vote against the Wall Street bailout is a victory for the American people and rejection of at tempted extortion by corporate and political elites? Yes or no? Cast your vote at LouDobbs.com. We'd like to hear from you. We'll bring you the results here in just a few moments. Up next, more from our panel and is today's victory for American voters only temporary? Three of the country's top political minds will assess what Nancy Pelosi and Harry Reid have in mind for us, yes and then follow George W. Bush. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: We're back with Peter Morici, David Cay Johnston and Charles Calomiris.
David if I may say, part of me rejoiced today because I know the folks behind the bailout, whether they be Treasury Secretary Paulson or whether it be Speaker Pelosi, whomever involved, they're lying, cheating, thieves. The fact is they were absolutely dishonest about what this legislation, this bailout of Wall Street, would accomplish and the constraints they put on Wall Street as a result. JOHNSTON: The headlines on what's in the bill and what's actually in it when reading it are astonishingly different. Paulson bail out foreign banks, not required to pay the lowest possible prices, the executive compensation measures, well, I'll take a bailout and defer into the future collecting my executive comp and perhaps worst of all the oversight board to oversee this. Well, the secretary will sit on it.
DOBBS: Unbelievable. Charles, what -- what is your reaction? I mean, if this bill had been passed, think about that, what would have been the impact? In terms of the so-called prescriptions against bad behavior and punishment?
CALOMIRIS: Lou, it's hard to say, because as David pointed out, there was nothing very binding in the bill on the behavior of anyone. So it was really up to the architects of the plan, particularly secretary Paulson, whom I respect for very much, but it gave him enormous discretion. So it's hard to tell what the outcome would have been, what made the market so uneasy, before the -- the Dow was down 200 points before the market opened this morning. I think people were very concerned about the risks in this bill.
DOBBS: Yeah. And by the way you and I separated on our respect for Henry Paulson. When you talk about giving him great discretion, let me ask you a semantic discussion, do you mean absolute power?
CALOMIRIS: I don't favor it, I want to be clear.
DOBBS: Under the bill he would --
CALOMIRIS: He would have had enormous discretion, I think it's wrong. That's why I think he started in the wrong place with the plan. Buying as sets is not the way to handle it.
DOBBS: Professor Morici, you get the last word.
MORICI: Well, this plan was a sham. It didn't have real equity participation. Left the banks failed. They have to come back with a better program. Perhaps we have to bail the banks out, but bit about time we get a program that punishes perpetrators of the mess as opposed to rewarding them. Under the plan it would have been business as usual next month as it was last month. Let them come back with a program that gives the American people a payout when banks recover that provides for lending by the bangs so the economy can get going again. And that provides some real sanctions for those that made this met.
DOBBS: David I lie. I want you to have the last word. One quick question here if I may.
JOHNSTON: Okay.
DOBBS: This reaction today in the market, when we have political leaders like president Bush speaker Pelosi, Harry Reid, the senate majority leader, two presidential candidates who have been less than candid or strong on the issue, do you suppose any of this mark reversal is an expression of a lack of confidence in the country's political leadership?
JOHNSTON: Lou, it's an expression of the government terrifying people. People feeling in fear. The market only fell about nine points today by the broadest measure. Back in '87 it fell 22 points yet two of three networks two I watched began newscast business saying the big of the one-day point drop, which is meaningless. Markets go up and down. Maybe the bailout will make things worse, one thing we haven't contemplated.
DOBBS: At least some people haven't. Thank you very much; David Cay Johnston, Professor Morici, thank you very much, Professor Calomiris, thank you very much.
Up at top of the hour, "ELECTION CENTER" John Roberts in for Campbell Brown.
John, tell us all about it.
JOHN ROBERTS, CNN ANCHOR: Lou, thanks very much. In just a few minutes a time we'll have the very latest on the breaking news more than $1 trillion in investments and retirement savings evaporates as the Wall Street bailout crashes and burns on Capitol Hill. We'll have the latest developments from Capitol Hill to Wall Street and from the campaign trail to what may happen to your pocketbook. We're joined by former Treasury Secretary Larry Summers, Rudy Giuliani and a republican and a democrat who both voted dense the bill. A lot to cover tonight. Lou, we'll see you at the top of the hour in the "ELECTION CENTER."
DOBBS: Thank you very much, John.
And please a reminder to join me on the radio Monday through Friday for "The Lou Dobbs Show," among my guests tomorrow, Kathleen Day, author of "S&L Hell, the People and Politics behind the Trillion Dollar Crisis." Go to loudobbs.com to get your local listings for the show.
Up next, Senators McCain and Obama back the bailout of Wall Street and they blame one another for the failure to win a vote in congress. I'll be joined by three of the sharpest political analysts in the country next. Stay with me.
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DOBBS: Well, important legal rulings today that could have major implications for voting in Ohio. State and federal courts clearing the way for a week long period in which new voters register and cast an absentee ballot all on the same day. That period begins tomorrow. It's a defeat for republicans saying it could lead to voter fraud. It was a victory for the Ohio secretary of state, democrat, the measure will help, of course, democrats mobilize supporters among college students, homeless and the poor. Joining me three of the best political analysts in the country. Ed Rollins, former chairman of the Huckabee campaign, CNN contributor, Errol Louis columnist "New York Daily News" and from Seattle tonight, John Fund, "Wall Street Journal" columnist. Good to have you all here. What is your reaction, Ed, first to the court decision?
ED ROLLINS, REPUBLICAN STRATEGIST: I think I'd be concerned with voter fraud. Ohio's one of the key states. You know, I'm all for getting people to register to vote but the key thing is to overload the system and not worked out the details across the country.
DOBBS: Errol?
ERROL LOUIS, NEW YORK DAILY NEWS: I think of it as a pressure valve. 119,000 votes in Ohio would have changed the outcome of the election and looking at long, long lines and broken machines and people unable to cast a vote, courts having to keep the polls open, we'll see if it works this time.
DOBBS: John?
JOHN FUND, WALL STREET JOURNAL: This is same-day voter registration happening in about six states and Milwaukee reported how this led to voter fraud. I have a book out called "voter fraud." I want more people voting but follow what Ronald Reagan said, trust people but verify. Don't give a false address and vote at the same time.
DOBBS: What happens in this election, there is very little guarantee that fraud will not be massive and pervasive because the states simply do not have the wherewithal to manage the election process. It's that straightforward. We worry about electronic voting but just the basic enforcement of registration rules and making certain people are properly registered, it is crazy.
Let's turn to the $700 billion bailout and the defeat and what I'm styling here this evening as a great victory for the American people. Ed, what do you think?
ROLLINS: Obviously it shows that the speaker and team and Mr. Boehner and his team can't count votes. I think it is a big defeat for both of them or as you said tremendous victory for Americans. There was pressure to vote against this and they did.
DOBBS: Folks, congressmen and women going home to the districts and won't be back until district and hearing from constituents.
LOUIS: Guaranteed. A thing they'll hear is why not have, you know, the usual hearing process? A panel of economists and then they leave and a panel of labor guys and bankers and let's get the information out and explain it to the people to foot the bill and suffer the consequences. I mean, a way to read the market is people willing to let go of a trillion dollars, you know, rather than be bullied into paying a much smaller amount. That should send a signal.
DOBBS: Yeah. You just said something interesting from here the lawyers, accountants. The gurus. What happened -- I mean, it is called a public hearing. Why not hear from the public? Why listening to the public on Capitol Hill? Because you are right. They'll run the elites through the little chairs, the dance and the fact is won't be a single person, a citizen, a man or woman from the constituents they purportedly represent there to express the views. John?
FUND: Lou, I agree law and sausage making is ugly. But we have to act in a certain period of time because the markets are clogged and people are not getting loans so this is a time for presidential leadership. The president can do things by executive order. Change the accounting rules so companies and mortgages carry these bad assets on the books without going under. Secondly, he could say tomorrow, by executive order, I'm redefining capital gains. When you sell a stock, half of the stock is inflationary. Why pay tax on that? If the president redefined those, that could inject confidence and growth into the market.
DOBBS: I can just hear the democrats saying, yeah, fund the country. Strip off the agendas. When we come back, talking about how big is this problem and how best is it resolved? Stay with us.
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DOBBS: We are back with Ed, Errol and John.
John, I've got a view that it doesn't matter what this congress were to pass in terms of Wall Street bailout. There would be ineffective. We have a crisis of political leadership in this country not overcome with any piece of legislation. The American people don't believe in Bush. They don't believe in Pelosi. They don't believe in Reid. Your thoughts?
FUND: I agree. That's why we're headed for an economic downturn and lack of confidence that government can help get us out of this mess. There's steps to take to have pro-growth measures working through some of these bad investments we can cock out the other end but, Lou, I have to tell you this bill would be far different if we were voting after the election. It was only because we were voting before the election that the American people were able to get to the members of congress and say, if you vote for this, you have a very short political career and made the big difference here.
DOBBS: I think you are exactly right, and unfortunately --
ROLLINS: But that's a good thing.
DOBBS: Great thing.
ROLLINS: Because as you know, John, and Errol, we'll have an election in which the vast majority of them get elected again no matter what they do and paying very close attention and go home and sensitive to the voters for five weeks and then come back here.
FUND: Let's hope they pass something.
DOBBS: No, no, no. Not something. No, John. We're passed pass something. Let's not pass something. I would much rather the free market work and I know you would insist on free markets and free enterprise and resist government intervention, sure. I think there's something that congress can do to break the logjam and have pro-growth policies. I don't think we have to go to the bailout route. Didn't go the insurance route.
ROLLINS: Congress is totally diminished. This president can do nothing. He might as well pack his bags and go to Crawford, Texas, today. He showed the weakest ability to communicate with the American public. He runs out of the Oval Office, does a two-minute speech, runs back and he gets paler by the day.
DOBBS: Are you telling me that Obama and McCain represent anything better? They're both out there slamming each other for the failure of this?
LOUIS: No, no, no.
DOBBS: These two look like weak, confused - men who have no business leading -- leading anything let alone this great nation.
(CROSS TALK)
FUND: Lou?
LOUIS: Tried to duck it. Obama tried to duck it. McCain tried to inject himself into it awkwardly.
FUND: Lou, I fear -
(CROSS TALK)
DOBBS: And Obama is like get it done. Get it done. Ridiculous. LOUIS: It's not a shining moment for either candidate.
FUND: Lou, I fear we may be living in an era of pigmies on politics.
DOBBS: Well, I'll tell you what, whatever this is, we're in trouble because, I've got to tell you, those markets will be reacting first to the power of political leadership and it's -- we need a political leadership bailout. Far more than we need a financial bailout of Wall Street. Gentlemen -- go ahead.
ROLLINS: We desperately do, but Pelosi is still going to be the leader, and Reid is still going to be the leader, come January, and hopefully whoever the new president is he will veto some things and basically do some changes here.
DOBBS: I like it when you get Pollyanna-ish. Thank you, Ed Rollins. ROLLINS: Once in a great while.
DOBBS: Errol Louis, thank you sir. John Fund, thank you very much.
LOUIS: Appreciate it.
DOBBS: Tonight's poll results: 77 percent of you say today's congressional vote against Wall Street, the Wall Street bailout is a victory for the American people and a rejection of the attempted extortion by corporate and political elites. We thank you for being with us tonight. Join us here tomorrow. Good night from New York. Up next, "The Election Center", John Roberts in for Campbell Brown - John.
