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The House Rejects Bailout Bill; Wall Street Responds With Plummeting Numbers
Aired September 29, 2008 - 14:55 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
KYRA PHILLIPS, CNN ANCHOR: If you're just tuning in, the House of Representatives rejecting that $700 billion plan to bail out the financial system here in the United States. Being compared to a road block the size of something that we haven't seen since the Great Depression.
Live picture of the Capitol right now. Rick Sanchez, you're getting ready to talk about this for the next hour. Of course, that will lead to "THE SITUATION ROOM" with Wolf Blitzer. The Dow Industrial's down 568 points. We saw it rock Wall Street, rock the White House. Now it's rocking all of us and our money and our news coverage.
RICK SANCHEZ, CNN ANCHOR: Is this our government that we're arguing about? Is this the economy of the United States or a happy meal argument? It seems remarkable to me, and I think it does to most Americans who are watching this play out, that past the 11th hour they're now arguing about who caused it and whether you hurt my feelings because of what you said or, no, it was you who was being partisan. No, it was you who was being partisan.
Am I crazy or is this the United States of America and these are the people we elected to run this government?
PHILLIPS: Bottom line, it's affecting you, me, every other taxpayer and someone has to make a decision and move forward. It's going to be interesting to see if they even come to a decision. This may be in the hands of the next president of the United States. And that means either John McCain or Barack Obama.
Meanwhile, we have to try to sift through this and figure out we'll make it in the next couple of days with regard to a decision. Right now it's going back to the drawing board, Rick.
SANCHEZ: Well, and it does appear there will some kind of conversation. Now, what's important is, it's now turned into a political conversation that involves a whole lot of Makavelian play.
In other words, a lot of bickering and finger-pointing. We understand that Nancy Pelosi will be coming out any minute now to talk to us. And I guess, now we have to sit through her take on what the Republicans' take was about her being the reason that they really voted against this.
When you really look at that, you do have to ask yourself the following question in terms of the Republicans' assertion, right? Is it really Nancy Pelosi who caused you to vote against this? And if that's the case, then how committed were you to it?
PHILLIPS: Why don't we go back to the beginning. Where was the SEC with regard to monitoring the financial institutions? Now the FBI is involved in investigating corruption. These are members of Congress that received money in donations in support for their campaigns from the same people that are being blamed for being corrupt on the financial streets.
SANCHEZ: To the tune of $600 million, by the way.
PHILLIPS: And he we are, talking about $700 billion to bail everybody out.
SANCHEZ: It's amazing to watch how -- no. And, listen, I do this social networking thing and I'm on MySpace and Facebook and twitter.
And the consensus in the response that I'm getting is, throw the bums out. We are now more convinced than ever before that there's a true disconnect, not just between obviously the Bush administration and the American people right now, and we've gone through that.
Given the things that have happened in the past. But now, more than just the Bush administration, a disconnect between the American people and their representatives. It's what the polls show. And I think it's what we're seeing, perhaps, as much today as ever. These guys and these women were asked to step up and make a prudent decision and it doesn't appear that they've been able to do so.
PHILLIPS: All Americans want to do is be able to fill up their car with gas. Go to work, to a job that they can keep. Be able to save a little money so they can send their kids to go to college, and just be able to move along in a society where we pay taxes.
SANCHEZ: It's amazing how it's playing out. Let's go to Kate Bolduan. Kate Bolduan is one of our congressional correspondents. Kate, the American people are looking at this and they're going to be shaking their heads and they are going to be saying, how is it possible that these folks weren't able to come together? I imagine they know the American people are going to be asking that question, right?
KATE BOLDUAN, CNN CORRESPONDENT: Oh, absolutely. I have to tell you, there is a lot of head-shaking going on here on Capitol Hill. This happened in the -- in the House. This vote was a bit of a surprise, especially to some senators, both Democrat and Republican, who while the vote in the House still needed to happen, the Senate was fully anticipating voting on this on Wednesday. I just spoke to one of the principal negotiators on the Republican side for the Senate, Republican Senator Judd Gregg.
And he said he was very disappointed and he said very honestly we don't know where we're going to go from here. We don't know what needs to we tweaked. All he knows is, Judd Gregg says that he kept an eye on the markets and he says the markets are responding and that is what is really scaring him at this point. I mean, this was definitely a surprise for many people, but at the same time, all morning we did say we knew this was going to be a tough vote. We knew there was strong opposition on the House, especially among House conservatives. I actually just had a statement from one of the strongest opponents, the Republican Congressman Jeb Hensarling in Texas.
In a statement he writes: "Just in part, I've made clear from the beginning that the Paulson plan had fundamental flaws that were unacceptable to the American people." He goes on to say, "And that should not have been the only alternative considered by Congress." Clearly we know they're going to have to go back and consider other alternatives now.
SANCHEZ: Kate, let's go and listen now to Nancy Pelosi's take on this. She is now at the microphone. I think she's going to be flanked with Steny Hoyer you see and a couple other members. Here we go. Let's listen in.
REP. NANCY PELOSI, (D-CA) HOUSE SPEAKER: Good afternoon. As you know, about a week and a half ago, the administration visited Capitol Hill and described a crisis in our financial markets and in our economy. A couple of days later, they presented us with their legislation and since then, we have worked in a bipartisan way to improve that legislation. We entered into those conversations in the spirit of bipartisanship, with the understanding that each side would have half of our votes to pass the bill.
Today when the legislation came to the floor, the Democratic side more than lived up to its side of the bargaining. While the legislation may have failed, the crisis is still with us. Some of the issues that we worked with the Republicans to improve the initial legislation related to oversight and protecting the taxpayer as we stabilized the market, it was about ownership and equity of some of the -- of the -- in return for some of the investments we made.
It was about forbearance for homeowners so they could stay in their home. It was about corporate pay and how that had no more golden parachutes. And was also about again, oversight, oversight, oversight.
I think these were major improvements to the bill and as I say, they were bipartisan. Again, the administration impressed upon us the seriousness of this crisis in terms of the market. We know how serious this is in terms of the middle class in our country. Whether it's a question of credit for small businesses, for homeowners, for protecting savings for people, for their pensions, for their retirement, for the education of their children.
Whether it's keeping the store on the corner open to service the needs of the people in the neighborhood. America's communities have been feeling the downturn in the economy for a very long time. So in any event, where we go from here is that we still have those concerns about everyday Americans, about the concerns of the middle class and how they might be affected by what is happening, the crisis on Wall Street.
We want to insulate them from that. We want to protect them from that. And the lines of communication remain open. I just spoke with Secretary Paulson. I said, Mr. Secretary, we delivered on our side of the bargain. You impressed the members about the gravity of the situation, that action was necessary to stabilize the markets and to protect the taxpayer.
Clearly that message was not -- has not been received yet by the Republican caucus, but, again, we extend a hand of cooperation to the White House, to the Republicans, so that we can get this issue resolved for the benefit of America's working families to strengthen our economy and therefore strengthen our country. We work together as a team in a bipartisan way, and I'm -- I wanted to acknowledge especially the work of our chairman, Barney Frank.
He has great knowledge of these subjects, a great intellect to deal with the challenges, and I think never has that intellect and that knowledge, he's never been more helpful to the American people. He was also -- Rahm Emmanuel who has been in and out of politics and spent time in the markets was also a tremendous, tremendous assist to us in the negotiations so that we could find our common ground. So I wanted to salute them in particular. Our majority leader, Mr. Hoyer, and our distinguished whip deserve a great deal of credit for their part in all of these proceedings, including getting 60 percent of the House Democrats to support a bill, which isn't our bill. It is the president's proposal, acted upon in a bipartisan way. Improved upon in that manner.
But evidently not voted upon that way. Again, the legislation has failed. The crisis has not gone away. We must work in a bipartisan way in order to have a -- another bite at the apple in terms of some legislation. With that, I'm pleased to yield to our distinguished Majority Leader Mr. Hoyer.
REP. STENY HOYER, (D-MD) HOUSE MAJORITY LEADER: I said on the floor this was a very consequential day and that we need to come together not as Republicans or Democrats and support the president's request, Secretary Paulson's request, to respond to a very difficult challenge facing our country. Our country is challenged by a very severe economic downturn. The effort that was made today was supported by 60 percent of the Democrats, notwithstanding some reservations. Many had great reservations about the bill.
We did so because the president, Secretary Paulson, the administration, and many others on both sides of the aisle, conservatives and liberal economists, have said that the failure to act would not be an acceptable alternative. I regret that the bill did not pass today. We are going to continue to work as the speaker has said, while the bill has failed, the crisis has not disappeared.
It's incumbent upon us, therefore, to continue to work, to continue to work in a bipartisan fashion, work with the administration, work with our Republican colleagues in the House and the Senate, work with the secretary, to try to continue to address this very, very serious issue that confronts our economy and our American people. And we will do that.
REP. JIM CLYBURN (D-SC), HOUSE MAJORITY WHIP: I think that many of you have heard me talk about the diversity of our caucus. Eight distinct caucuses within the Democratic Caucus. Many of these caucuses are formed because of the experiences that people have had in life.
All of these experiences were brought into this discussion, and I want to thank Rahm Emanuel and Chairman Frank for bringing all of this into one comprehensive bit of negotiations.
After all of that, we came to the floor today with a piece of legislation that the members of our caucus decided was in the best interest of the country. And 60 percent of them put aside all of the individual feelings, emotions, experiences, and voted for this bill. Sixty seven percent of the Republican conference decided to put political ideology ahead of the best interest of our great nation.
I'm hopeful that as we move forward that we can all join hands, set aside our partisanship and do what's in the best interest of our country, and I hope that will happen within the next few days. With that, I'll yield to our chair, Mr. Emanuel.
Chairman Frank.
REP. BARNEY FRANK, (D-MA) FINANCIAL SERVICES CHAIR: I'm disappointed. I will say this. I would like nothing better than to be proven wrong in the next couple of days. That is, I was persuaded by what I read and hear and see, a range of people I talk to. The secretary of the Treasury, the head of the Federal Reserve, that we do have a serious crisis, that we are threatened with a shutdown of the credit system that will put great pain on people across this country in an economy that's already weakened. Maybe that's wrong.
Clearly a large number of the members of the House don't believe that. Some had a different view. Some said there was no great crisis. If, in fact, that turns out to be the case over the next period, then I will be very cheerfully admitting error and take the rest of the year off.
I am not confident that will happen. And here's our dilemma. We've been working very hard for a week and a half trying to negotiate a bill that could pass the House. I will say that many of us had been telling the secretary of the Treasury that he had to have two things in mind. One, what would work given the psychology of Wall Street? But two, what would pass the House?
And I will acknowledge that I think part of our problem was that we had not fully accepted that. Nonetheless, we did improve the bill. I do want to be very clear, what we added to the bill was no part of the reason for the defeat. As you listen to the debate, that was not why it was defeated.
There is a wing of the Republican Party and several of them said this publicly who believe very deeply in this free market ideology, and some of them said explicitly, yes, we understand there will be economic pain, but we think that it is worth preserving freedom and as they see it, freedom would be somehow impinged by this government intervention. I disagree, but I understand it. But the fundamental point is this, we are ready to continue to work on this. As a practical matter, the initiative will probably come from the administration. I would hope that the administration would be able to work more closely with the members of their own party here in the House because this bill cannot and should not pass as a one-party bill. That's not good for the country in dealing with some kind of a crisis. So I'm ready to work.
I mean, as a practical matter, tomorrow and Wednesday being Rosh Hashanah, I will not be available for governmental work. Other people will be and the conversation can go on. We're ready. I still believe it is important for the country to come up with a piece of legislation that will alleviate this credit crisis, but I -- we obviously have to ask the administration as they go forward with it to coordinate with their Republican colleagues.
I do want to make one point. There was a bill proposed by some of the Republicans late last week as a substitute for the Paulson plan. It was the administration that said, no, this is simply not a substitute for our plan.
We were willing to accept in the interest of compromise a modified version of a part of it. But the administration said, this would not work. So we are ready to keep working. As I said, if we were all proven to be chicken littles and there is no problem with the economy or no crisis, then OK.
If, in fact, that's not true and there is a crisis, I am available, members of the leadership and other members of the Congress on our side are available to continue conversations, but we do ask that there be some better coordination on the Republican side so that we have a chance to put something together that can pass Congress.
PELOSI: We'll be pleased to take any questions you might have, a few questions.
QUESTION: (Inaudible)
FRANK: I will address that.
I am appalled -- frankly, that's an accusation against my Republican colleagues I would never have thought of making. Here's the story. There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis. And because somebody hurt their feelings, they decide to punish the country. I mean, I would not have imputed that degree of pettiness and hypersensitivity.
We also have the leader, will tell you, we've been working with them, we don't believe they had the votes, and I believe they're covering up the embarrassment of not having the votes, but think about this. Somebody hurt my feelings, so I will punish the country. That's hardly plausible.
And there are 12 Republican members who were ready to stand up for the economic interests of America, but not -- I'll make an offer. Give me those 12 people's names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they'll now think about the country.
QUESTION: (Inaudible)
REP. RAHM EMANUEL (D), ILLINOIS: First of all, I want to take that question with the prior question. And this goes back last Thursday. When Secretary Paulson and Chairman Bernanke indicated the magnitude of the situation facing the American economy, nobody pointed fingers. Everybody took that -- the seriousness of that warning from two individuals and responded accordingly to develop a plan.
They sent their plan, which was basically an attempt to calm the markets. We met that with what we needed to do to protect our constituents, the taxpayers. But at no point did anybody ever say or do anything that was contrary to the interests of the country or say they didn't like the tone of a speech or the words of the speech.
The members of the administration, appointees of the administration came and told us of the dire consequences and we responded not as Democrats, but as Americans. So the notion that somehow a speech basically was not a call -- that somehow this moment was not a call for a profile in courage but for partisan politics is beyond me how that can happen.
At every step of the way, both that Thursday night and last Saturday night when we sat in there all the way, as you well know, Paul, until 1:00 in the morning, I think it was, starting at 3:00, it was an attempt to find that common ground, and we -- and it was stated that common ground both by Senator Gregg as you heard him that night and Roy Blunt that we thought we had found the very basis of both principle and politics. The principle being that we were going to calm the markets. And what we saw as legislators, the assurance to protect the taxpayers and that we would join hands and get this done. That's why we produced 140 votes ...
CLYBURN: A hundred forty one.
EMANUEL: A hundred forty one - a hundred forty, which was two thirds of the Democratic Caucus to meet the nation's challenge. But at every step of it the way from that Thursday meeting, Saturday night, to the vote on the floor, we saw that not as Democrats, not just as -- but we met that every step of the way, drafting the legislation and voting on it and vote counting as people who were meeting the challenge of their country.
PELOSI: But also, part of that was also every step of the way. That we would have half the votes and they would have half the votes because we believed that this had to be bipartisan. And, again, members didn't really see the bill in its final form until yesterday afternoon. That's when we found out how many votes we would have in the course of the past 18 hours or something.
FRANK: I just want to add one thing. In one of the truly great coincidences in the history of numerology, the number of deeply offended Republicans who put feeling over country turned out to be exactly the number you would have needed to reverse the vote.
QUESTION: (Inaudible) including a reduction in interest rates and (inaudible) in the bill or not?
FRANK: Oh, I think that was absolutely essential that that would be in the bill. It was not objected to by the secretary of the Treasury. What we're saying is the cause of this crisis was foreclosures, and we have said this. This is now the federal government as the owner. That does not apply to the federal government telling another owner of the mortgage what to do. This is the federal government saying, we own these mortgages and we believe it's in the national interest and the interest of the economy to reduce the -- to reduce the principle.
By the way, it is an embodiment in that bill of the principle that we put into the previous bill that passed, only there we were trying to induce private mortgage-holders to do it. It certainly wouldn't be reasonable to try to get private mortgage-holders to do it and then when we hold the mortgage, not do it ourselves.
EMANUEL: Let me add one other thing. That very section was as you improve the ability of people to pay their mortgages, the values of the very securities you had improved in value. That's making sure that taxpayers would get a return on their investment. So it's not just out of a sense that they're troubled and we're just trying to help them. If you helped people who held those -- were paying on those mortgages stay in the home and continue to pay, the value of what the government then owns increased in value. It was helping what we were doing. Not only keep people in their homes, but help the taxpayers get a return on their investment. It's exactly what you want to have happen.
QUESTION: (Inaudible)
HOYER: No, I never had an exact number. Nobody ever questioned me or anyone else not to move the vote to the floor. Clearly the administration from the very beginning last Thursday night, a week ago Thursday night, Secretary Paulson, Chairman Bernanke sat with us and said speed was of the essence to respond to this crisis so we could stabilize the markets.
Mr. Boehner was in the room and he said absolutely he agreed would that, so we have moved this ahead. Obviously we were supposed to adjourn on the 26th. We've worked through the weekend. We worked together in the meetings that you've heard about and know about in order to accelerate this process and be able to respond to it. So that -- and that's exactly what we did.
Unfortunately, in terms of votes, we indicated we probably had 125. We came up with significantly more than that. So that we could try to help pass this bill and make this bill happen. I want to make a very clear, no Democrat that we could get to vote for the bill didn't vote for the bill. It was controversial on our side. This was not our administration's request. It was the Republican administration's request. But we tried to do everything in our power to -- to meet the administration's request. President Bush was on the television in the Rose Garden at 7:35 this morning asking all of us to vote for this bill. The minority leader and the minority whip got on the floor today, asked all of their members, all of their members to vote for this bill. Unfortunately, as Barney Frank indicates, they didn't get close to the half of the members that their expectation was they would be able to do.
SANCHEZ: OK. If this is where we are now, as we put this whole thing together for you -- welcome back, everyone. I'm Rick Sanchez. We're here in the CNN NEWSROOM in what is a really momentous decision. This bailout bill has essentially been rejected by legislators.
Maybe the very first thing we should do is call your attention to that number you see right there on the screen. Because ever since this happened, the market has been reacting in no uncertain terms. Where it is at right now? Six hundred sixty nine. I think I heard Ali Velshi say that if it hits the 700 mark, we're in new territory.
So we're looking at something now that's obviously going to have an impact on our nation's economy as had been predicted. The question is how wide and how varied. There's something else we have to bring your attention to now. Those of you just now getting home from work, here's what happened.
This thing got rejected by a pretty substantial number. It was somewhat surprising and unexpected. Let me show you now -- maybe we could split the screen. I want to show the vote tally and show people at home exactly who voted for what on this thing. So they can see the breakdown of how Democrats voted and how Republicans voted. All right. There it is. I think you can see it right there on your screen. Democrats, yes 140. Democrats against, 95. Pretty close, but as you see, the Democrats were in favor of it. Now you go over to the Republican side, does that say 133 nay and 65 against is the number as it stands.
That was the final tally as this thing came in, oh, about an hour and a half ago. Since then, there's been a lot of lobbying, a lot of debating, and there's also been plenty of bickering. Yes, bickering. Why?
The Republicans have just held a news conference shortly ago and what they said was the reason we couldn't come up with enough votes is because of something that Nancy Pelosi said. She was one of many people speaking today on the floor. And they say that it was what she said that really made many Republicans vote against the measure. Well, what did she say, right? That's the obvious question that you have.
We have been able to get that -- that response from Pelosi ready to go. Here it is. You listen to it for yourself and decide looking at it from the perspective of a Republican whether it was offensive enough to make them vote against the measure. Here it is. Let's roll it, Dan.
(BEGIN VIDEO CLIP) PELOSI: When President Bush took office, he inherited President Clinton's surpluses four years in a row, budget surpluses. On a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years he had turned that around. And now eight years later, the foundation of that fiscal irresponsibility combined with an anything-goes economic policy has taken us to where we are today.
They claim to be free market advocates when it's really an anything-goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute and the taxpayer will bail you out. Those days are over. The party is over.
(END VIDEO CLIP)
SANCHEZ: So she really gives it to the Bush administration. And many Republicans took offense to that. So much so that they're now saying it was those comments by Nancy Pelosi that may have caused many of their members to go against this bill. I want you to listen now because remember this was a debate that took some time. We were carefully monitoring all of it while it was on the air.
And we want you to listen now to a couple of these in particular. Why don't we do this. We'll start with the Bolshevik revolution line. This is Thad McCotter, Republican from Michigan. Listen to what he had to say about this measure earlier today. He was one of those definitely against it.
(BEGIN VIDEO CLIP)
REP. THADDEUS MCCOTTER, (R) MICHIGAN: And it has always been the temptation in a crisis especially to sacrifice liberty for short-term promises of prosperity. And it was no mistake that during the 1917 revolution, the slogan was peace, land and bread. Today, you are being asked to choose between bread and freedom. I suggest that the people on Main Street have said they prefer their freedom. And I am with them.
(END VIDEO CLIP)
SANCHEZ: It's amazing to see this thing, the way it's developed. But we have been monitoring it throughout the course of the day. Let me direct your attention to one thing. We've been monitoring this on Facebook, MySpace, and twitter.com -- twitter.com/ricksanchez/cnn. Look at this.
Justacityboy says: "Barney Frank said it best. Stop fighting on the playground. Put our country first. Oh, wait, isn't that McCain's campaign?"
All right. Let's go to Ali Velshi. He's standing by. He's going to bring us up to date on the market. How bad is it?
ALI VELSHI, CNN CORRESPONDENT: Take a look at the screen. Six seventy four right now. It has recovered in the last 30 seconds while you've been talking. Less than a minute ago, the Dow was down 722 points. Which is the biggest point drop that the Dow has ever experienced in history. In fact, I remember very clearly the day it hit 722 lower and that was September 17th, 2001, the day the markets opened after 9/11.
So we have now broken that record. At this point, anything lower than 684 points is the biggest point drop that we've ever seen. Now, that said, Rick, I want to tell you when you're looking at your investments and you're looking at your 401(k) and when you're looking at the market, the point drop is not the significant part.
It's the one that we can follow, but the percentage drop on the Dow is about 6.25 percent right now. On the S&P, it's almost eight percent lower. The S&P is of greater concern to you than the Dow. At eight percent, we are in the range of one of the top ten losses on a percentage basis in the history of traded markets.
So this is very serious. Now, all of this is to say, Rick, that the markets are not in fact the story here today. The stock market can continue to make money trade up or down. We're back in that minus 700 territory now. The issue here is credit markets are frozen. And credit markets are where the companies that you work for get their short-term money in order to meet operating expenses including rent and sometimes payroll.
We are now at the highest point there, 724. That was the biggest loss we've seen today. We're now in historic territory.
When credit markets free up, some companies may not be able to make their payroll. They may have to shut down a shift at plant. That means people will lose their jobs, their homes, people will have difficulty getting loans. Honestly, Rick, from a financial perspective, this is not a day to dig in on principles. It is reflective of a fundamental lack of understanding on Congress about financial markets. And I understand that and I understand why there would be a fundamental lack of understanding amongst Americans because we've never had to deal with this before. We've never had to understood how financial markets work and how credit markets works. But I cannot underscore this enough, Rick, how serious an issue this is.
SANCHEZ: Ali, just in the time that you've been talking, this thing has gone from the sixes into the 700s.
VELSHI: Yes.
SANCHEZ: Can you give us any historic reference on this? How big is this from, you know, bad days in the past?
VELSHI: Yes, well listen. This is the biggest point drop that has ever been seen in a day. We just hit 730 or something. That's -- we've never seen that before, first of all. So the biggest drop that we've seen in a -- in terms of points at the end of the day.
SANCHEZ: Wait, wait, wait. When you say we've never seen that before, are you talking in the history of the market in. VELSHI: In the history of the market. You've never looked at a board and seen 724.24. Never seen that ever before. On September 17th, 2001, we saw 722.11. That was the lowest the market got in point numbers. Again, we only talk in point numbers because that's the thing we see. Let's look at this in percentage terms. We are talking on the S&P 500, a loss of almost 8 percent. In one day, 8 percent in one day. If you were to get 8 percent in a year on an investment you had, Rick, I'd say it's not fabulous, but it's a pretty good gain.
To lose eight percent in one day on a broad range of stocks, 500 stocks, is fairly significant. That means there's no American who isn't feeling this one way or another today in their portfolio. They're also feeling it because there's pressure on their bank and their CD, their money market. We're not going to lose that money, but when we have to worry about what bank is next, this is not a time to be getting annoyed about whether you didn't like somebody's speech. I have to implore folks involved to say the world is not coming to an end. It is not Armageddon. For those of you at home there is no need to panic because there's nothing you can do about this right now, but for those that have the power to do something about this right now, understand that time is of the essence.
The credit markets, the ones that your employers use to borrow money from banks and from other companies, are shut down. They are frozen. There is not money flowing between banks and between companies right now.
SANCHEZ: Well, look, there's a political side to this and there is an economic side to this. Ali, stand by. We'll have Christine Romans in a minute. We've got reaction coming in from many of the people who are now watching this newscast thousands and thousands of them. Many of them are quite angry as you might expect from both parties, apparently.
Let's take this one. Let's go to our twitter board. Pelosi was foolish to gloat about a deal not voted on yet, but the GOP is still trying to blame her for their failure. It's ridiculous. There were a number of Republicans in support of the package. They're just looking for a scapegoat. All of this having to do with what is being -- what is going on right now in the -- between legislators and a lot of fin finger-pointing. Let's go to Suzanne Lisovicz. She's also following the markets for us. Susan your take.
SUZANNE LISOVICZ, CNN CORRESPONDENT: Well you know it is the biggest point loss that we're seeing for the Dow Industrials, Rick. I'm not going to sugar-coat it. It's a nasty day. There is a lot of uncertainty, the street is nervous. You're seeing it play out dramatically. Historically speaking, we've seen far worse. I remember one of my first days here working at CNN as a business correspondent, trading actually stopped. The only time it did stop, and that was because the Dow had dropped 550 points, which was a 7 percent drop at the time. For it to stop trading right now, you'd have to have 1,200 points -- a 1,200-point loss on the Dow.
So those are numbers, the fact is, I mean, if you're looking at your 401(k), you're seeing losses probably this year. Where is the money going? It is going to the safest possible investments. We have seen a virtual stampede into U.S. treasuries. So much so that for the first time ever, you saw the yields on the T-bill, which is probably, considered the safest of the safe, approach zero. In other words, investors say, you know what? I don't even need to make a return. Just as long as I get my money back. That's the kind of time, Rick, that we're living in.
Another thing that we're seeing here, as a result of this uncertainty about the credit markets, we saw a huge spike in -- excuse me, not a spike a huge sell-off in oil prices. Oil settling down, $10.50 today and that is on the expectation that the U.S. economy and economies around the world, which are so dependent on the U.S. economy, will continue to contract. So there's a lot of uncertainty here and it's playing out in a sell-off.
I should also mention one other thing. Everyone wants to know what's going to happen in Washington next. The one thing we don't talk about a lot is volume. Volume is pretty light despite the fact that it's a big point drop. Volume is pretty light. That's because everybody kind of doesn't know what to do. Do you sell off accelerating in the final hour of trading? No surprise there either because there's a whole lot of time before the market reopens tomorrow. Rick.
SANCHEZ: We should let you know as well that we've just gotten word that Secretary Paulson is making his way over to the White House now. Apparently there's a meeting in the west wing. There may be a statement coming from the president or Secretary Paulson. As soon as that happens, we'll turn that around for you.
By the way, what are we now? Thirty four minutes after the hour. That means we've got a good twenty six minutes before the market closes. A lot of people there on Wall Street are looking at it now kind of like this with their eyes closed hoping it doesn't go lower than it is already. Obviously a big part of the story is the credit market and the effect it will have on you, watching this newscast right now, trying to figure out how it could possibly affect your family. The bread and butter issues. Let's go to Christine Romans. She's joining us now as well; she has been following the reaction of this. What can people -- Christine, are you there?
CHRISTINE ROMANS, CNN CORRESPONDENT: I'm here.
SANCHEZ: What can people expect when they look at this? They're thinking, my goodness, it's finally happened. We've been told for a week now that if they don't pass this measure, it could be catastrophic.
ROMANS: It is absolutely going to affect them. I mean it already is. Ali said that the credit markets are frozen. That means that a lot of companies that borrow on a very short-term bases to pay for their payroll, to keep the light bills going, I mean, these are the sorts of things that are -- are really locked up right now. One of the hard sells about this bill, Rick, was that this is something that if they -- if they did pass it, you might not feel any better about things because we still were going to see a recession potentially and we are still going to see more job loss and we are still going to see higher bills for gas and to heat your home.
But that was one of the real hard sells of this. It was almost as if you got to do this and swallow this pill so things don't get worse. So right now, everyone is wondering just how bad are things going to get? Am I going to be able to use my ATM card at the ATM machine? We just don't know quite yet. That's what these guys in Washington and men and women are going to have to face in the next few days as this frozen credit market starts to trickle down.
SANCHEZ: Do you suppose that Henry Paulson -- he almost seemed for the last couple of days somewhat confident that this thing was going to be worked out. How would you describe his reaction to something like this? I know we should be hearing him any moment now. Do you think he was shocked by this?
ROMANS: I have to think there are a lot of people in Washington that are flabbergasted by this, flabbergasted that all of the people in Congress and a lot of people in America didn't believe the whole line that, you know, something really terrible is going to happen unless we do this now, do it fast, do it quickly, just get it done. There is a lot of resistance to that.
What's really interesting in this to me, Rick, even a year ago, a year ago the administration was saying that the fundamentals of the economy are strong. It wasn't until last December that the president acknowledged storm clouds on the horizon. And a year and a half ago, the treasury secretary was saying it was the best global operating environment of his business career. So this caught everybody off guard. That's another reason why people in the country are mistrustful of what's happening in Washington. A lot of people who are the smartest guys in the room on Wall Street and a lot of the people in Washington didn't see it coming.
SANCHEZ: Let's bring Gerri Willis into this conversation. Because you know it is the housing market that has had so much to do with this. We've been in an environment where people have been buying houses, flipping houses; it's made for many a TV show. And now we're looking at a situation where we're actually seeing that maybe a lot of people were getting homes that shouldn't have gotten homes. Does it all really come back to that, Gerri?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: It does come back to the housing market. But I think you have got to say that Wall Street played a huge role in this. And they are getting hammered today. Rick, the stock market is getting clobbered. But bank stocks, I'm telling you, it's ugly. The inadvertent victims in what happened today could be more banks and more bank failures. I think people aren't seeing it today. They're focused on the top line with what the market is doing and they don't see that, you know, investors are really focusing their eye on the financials. At the end of the day Rick, you know what that means that's mine and your banks that could be in trouble.
SANCHEZ: Why the huge disconnect? You were saying it. Ali Velshi is saying it. Christine Romans is saying it. Everybody seems to be saying with one voice in unison, something has to be done or this will be very -- or this will be -- hold on a minute. I'm being told we've got to go to Wolf Blitzer now. Wolf what do you got?
WOLF BLITZER, CNN ANCHOR: All right. Rick thanks very much. The president of the United States as you been alerting our viewers there, he is about to speak. He spoke a few moments ago in the White House. The tape is now coming in. We didn't have a chance to bring you his remarks live, but you're looking at live pictures of the White House. Very soon, we will hear the president's reaction to this stunning, stunning defeat today in the House of Representatives, 205 votes in favor of the $700 billion bailout, but 228 opposed. Gloria Borger is here with us. We're waiting for the president, Gloria. The finger- pointing is going on. In the meantime, the markets are dropping big- time.
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes. The finger- pointing is really going on with the Democrats saying that they provided 2/3 of the votes for this measure and the Republicans saying that they did their part even though their caucus voted against it 2- 1, Wolf.
BLITZER: And this is going to continue. I suspect we'll hear from the president. Efforts to try to calm everyone down, saying the process will continue. That he will stay in close touch with Democrats and Republicans. They will need to go forward and find a bipartisan solution to this huge, huge setback. So many thought this was going to be a done deal that the votes would be there. Here's the president.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm disappointed in the vote that the United States Congress on the economic rescue plan. We put forward 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, and I'll be working with leaders in Congress on a way forward. Our strategy is to continue to address this situation, this economic situation head-on and we'll be working to develop a strategy that will enable us to continue to move forward. Mr. President, welcome. Welcome you here to the oval office. I admire your steadfast support for Democratic values.
(END VIDEO CLIP)
BLITZER: OK. There he is, the president moving on to an issue involving U.S./Ukrainian relations. Gloria, the president is very upset and very concerned about this huge setback as he wanted to see the house take action in favor today, setting the stage within a couple days for the Senate to follow suit.
BORGER: What's stunning about this is not only did Republicans by a 2-1 vote vote against their own president who was in support of this bailout, but John McCain also had come to Washington to make sure that this bailout was going to pass and he had supported it. And his campaign is -- is now saying that why didn't the Democrats provide the votes that they told us they were going to provide us? They're saying this isn't a lack of leadership certainly on their part. But the president essentially, Wolf, was irrelevant. Turned out to be irrelevant in this process. BLITZER: He didn't have the clout that he would have liked. Ed Henry is at the White House. What are they saying behind the scenes, Ed?
ED HENRY, CNN CORRESPONDENT: The White House officials are saying they're stunned by this. They're disappointed. They're trying to figure out what to do next. They've been burning up the phone lines to the other end of Pennsylvania Avenue. Obviously both the Democratic and Republican leaders as well as White House officials knew that there was a risk here to this vote. As you know, most times these days on Capitol Hill, congressional leaders know these votes are preordained. It's something like the highway bill, something not as important as this crises, something as urgent an emergency like this and they know before hand certain number of Democrats will vote for it and certain number of Republicans will vote against it vise e versa. And they throw it on the floor and they pretty much know how it is going to turn out.
This was one of those votes that's very rare where the leadership comes together and the Democratic and Republican leaders were working together, but they didn't know how it was going to turn out because rank and file Republicans in particular were very much opposed to the bailout. So you had the leadership, you know, rolling the dice, something they hate to do. Because they did not know whether the votes were there. Obviously in the end, the votes were not there.
Gloria was right. This is a real blow to President Bush. It shows his diminishing clout in his final days, but it also is something where John McCain is in some peril here as well. He used a lot of political capital last week by coming back to Washington, saying he was going to work on this. What the McCain camp is saying, they're saying, look, he twisted about 61 votes to the Republican column. There had only been four house Republicans in favor of this last week. Now there were 65 voting for it. They're trying to blame it on Barack Obama as Gloria said. But the fact is 133 house Republicans voted against it. That's why this failed. Not because of Democratic votes.
BLITZER: And now basically 133 of those Republicans, Ed, voting against it. Voting against what the president, a Republican, was trying to do. Let's go to Jessica Yellin on Capitol Hill. There is a lot of finger-pointing going on right now. What's next in this process, Jessica?
JESSICA YELLIN, CNN CORRESPONDENT: Wolf, that's what I'm trying to figure out right now. What the leadership is telling us on the Democratic side is they have to break for now and figure out if this bill has to be renegotiated and then reintroduced possibly Thursday morning at the very earliest. But that's not even a set time for the house to reconvene. One idea on the floor, one idea that's been thrown around is possibly the Senate could vote first on this exact same bill and perhaps that would put pressure on those 12 Republicans and more to change their votes to yes votes.
But we have not heard if that's even a possibility. Another option is to try to renegotiate some language to give some of these no votes some cover to change their votes in time. The overall sense is that if the markets continue to do as -- to do what they're doing right now, perhaps that will increase the pressure enough to get folks to change their votes to yes within the next two days.
BLITZER: All right. We're going to watch all of this very carefully. Lots riding on this. Rick, you know, as we watch what's going on, there's going to be enormous political fall-out, but as significant as that is, the fall-out for a lot of individuals. Their life savings in many respects. There could be serious fall-out there as well. We'll watch all of this closely.
SANCHEZ: This really is a two-pronged story. There's a political side of it, and a lot of people are shaking their heads about that. But it also has to do with bread-and-butter issues, man. This is about how people are going to get through this. Thanks a lot, Wolf. We will be looking for you in about 15 minutes to continue taking us through this in the "Situation Room."
Let's get back to Ali Velshi right now. To try and get a sense of what is going on once again on the market. Ali when last we talked, we were into the 700s and now we're down to the 542s. Is that a good sign?
VELSHI: Rick, there is a lot of range in the trade right now. And it's got to do with not fully understanding - Rick I'm going to take this out of my ear for a second. I'm hearing myself back. The issue here is that traders and investors are trying to make sense of what Jessica just said. Is there some chance that this bill gets revitalized in its present form or in some adapted form? And actually gets done.
So we're trying to decide whether this is really, really bad or this is sort of bad. But the thing you have to remember here, Rick, while this is the number we look at on the screen, it's the number we can follow, it is less significant in a percentage term, but what it is not telling us is the story of credit. The ability for the companies that we work for to get short-term loans. Christine Romans said this to you, to get short term loans and be able to pay their bills.
Some of those bills might actually include your payroll. So this is a serious issue that's going on in the background, and this isn't solving it. So the -- the pressure is only -- you're only seeing part of it in the stock market. It's kind of like a barometer of what's going on, but it's not the direct impact of -- of the credit freeze that we're in right now. That's the very serious part.
When companies can't meet their payroll, or they can't let money flow downs the system to you. You're not getting a loan, you're not getting a mortgage, the person trying to buy your house is not getting a mortgage, and fundamentally someone may be out of a job because their company can't make payroll because they can't get a short-term loan. That's the seriousness here. They need to get something done.
SANCHEZ: Here is the question I think many American people -- I know --
VELSHI: I've got it back in now. I can hear you.
SANCHEZ: Here is a question a lot of Americans want answered. If the credit market is frozen, simply because of the expectation game? If you tell them you have 700 billion dollar coming your way, of course they're going to freeze the market.
VELSHI: We know that the credit markets froze up on the day that Henry Paulson announced that they have this bailout plan and they're going to Congress with it, on the Thursday, last Thursday. The idea that there is money out there means -- and let's say I was about to loan you money, Rick. Now I'm not sure how this fits into this bigger deal, so nobody is loaning anybody money right now.
SANCHEZ: Right.
VELSHI: So it's part of the fact that -- there's possibly a solution to this. But we can't let our misunderstanding of the financial markets and our misunderstanding of how dependent we are on credit flowing between countries, between banks and businesses cripple us from making decisions, particularly if it's a decision made for political reasons. We've got to lubricate the credit markets.
The banks and the companies don't care about the intricacies of it. We just need to understand there's money here. There's one place you can park your money and that is in treasury bills. The shortest Treasury bill is three months in duration. If you bought a treasure bill today, do you know what your return would be? On an annual basis it would four-tenths of one percent. So for safety of having a treasury bill backed by the United States government, they're prepared to take that interest rate. That is the safest Treasury bill you can buy, Four-tenths of one percent. That's how frightened people are about in investments, in homes, the stock market and everything else that you can invest in. Even oil dropped more than $10 today. That's -- usually we see money going into oil. This is serious.
SANCHEZ: Then you do wonder why there is that disconnected. Why so many Americans are saying let's just go ahead and tell our Congressman and our Congresswoman that we don't want them to go along with this measure and --
VELSHI: And you understand that, right, Rick? You get those questions on twitter, you get e-mails and calls. People don't understand this and they're mad that someone got them into this. They didn't get themselves into this in many cases. But they are mad about it. All I have to say is that I understand. We understand that people are angry about it. That can't prevent us from solving this problem. You can't not put the fire out because you're mad about who started the fire. The bottom line is something is on fire; it has to be put out and then spend a lot of time dealing with how this never happens again.
SANCHEZ: That's well-put. Let's go to Suzanne Lisovicz who is standing by. Suzanne Lisovicz, I want to ask you something a lot of folks happened to see this today. By the time they got home from work, they saw the result. But you were there when the market first started reacting. Take us through how that happened when we first started getting an inkling that this may not pass.
LISOVICZ: I happened to be on the floor, Rick. You know, we had already seen a nasty sell-off. A continuing sell-off sell off that we've seen now for days really over the uncertainty of what's happening in our financial markets. And a 225 point deficit quickly became a more than 500-point decline. When you see something decline that fast, you know that something bad has happened. There's been some sort of shock. I think the expectation was after all this talk of people coming together, putting aside the bipartisan bickering that a deal would get done.
No, it wouldn't be perfect. There would be a lot of compromises. A lot of people would have to hold their nose and vote yes. But then all of a sudden, I saw traders gathered around monitors. You'd better believe this was happening on trading floors, frankly, all over the world. And you saw a nasty sell off become, well, a very dramatic one. It's not historic in terms of it percentage declines. It's nothing compared to what we saw say in October of '87, but I'm sure that's not much comfort to all of us, millions of Americans, who have our futures tied up in the stock market. As Ali made the excellent point today, you know, calling it a Wall Street bailout is probably not the -- puts some sort of distance. We're all connected to this. We really are.
SANCHEZ: But it's hard to convince the guy in Montana either the red or blue state as he watched this thing unfold that it wasn't just a give away or a bailout. Semantics didn't really matter to him. Nobody's helping him, but he's being asked to help somebody else. That's perception wise what it seemed to come down to for a lot of Americans. Let's give a time queue here. It's now nine minutes till the market closes and we're back up again. Unfortunately up around 615. I do want to bring Christine Romans into this conversation.
Christine there were some changes made to this plan. Some would call them concessions. I'll go through a couple of them here. That money was going to be disbursed in stages, $250 billion at first if you can call that an installment. That taxpayers would get some money back if any of the stuff gets sold, that there's going to be a limit on CEO pay, $500,000, no more $10 million in bonuses, et cetera, and they were going to have two oversight boards looking at this thing as well. Was that not enough?
ROMANS: All of this was meant it to sooth the fears of the congressmen who had to sell this to constituents. They wanted taxpayer protection and homeowner protection and they got them. But the bottom line was the crux of this thing was supposed to get the credit flowing again. That is the crux, the most important part of this. Even with those other protections, they couldn't sell it. Now, what's going to happen next with or without this bill? You're going to see more jobs lost in this country. An economist we talk to here all the time says expect 100,000 jobs lost every month heading into sometime early next year.
You are going to see small businesses won't be able to get loans, more banks will fail. Almost everyone agrees there will be more bank failures and you're going to see home prices continue to fall. Here's the hard part. Are you going to see all of that with or without this, with or without this bailout? We're heading into some tough days here. The question is, we're going to be able to mitigate some of that pain or is there something worse to come?
You talk about what people say at home and what somebody says in Montana. A lot of people told me house prices were artificially too high. Why is the government stepping in and try to help the housing market? Maybe the housing market needs to have a lot of the air to come out of the bubble. There are people who realize it's going to be painful for them if this credit crunch persists but they feel like maybe home prices are still too high and it's a little bit of arm chair economists quarterbacking. People saying I don't know. Should the government step in? And if the government steps in, will they do the job well? A lot of people just don't think they can.
SANCHEZ: That's a decision they were trying to come up with today and enough of them decided they couldn't, they're going to stay away from it. One wonders if they're being almost punitive in the way they're acting. Ali Velshi, bringing it back to you if we possibly can. Give us a sense what this market will mean if it does end pretty much around what it is right now? What will -- we'll see tomorrow as a result of this?
VELSHI: Where we are is we would have the third biggest point loss that we've ever seen in numbers, and if we will -- but in percentages, we're not actually there. We're still some distance away from being in the top ten. Again, it is serious; it is not what we would call in the market a capitulation. It's not actually a situation where traders are saying I'm running away. If you were to move that camera over to the right of where those numbers were, there's a different story there. We're finding the loss mitigating a little bit. It says volu, and it says uvol and dvol. So volu is the total volume that is being traded 1.5 billion shares. 1.528 billion of those are on the downside. Only 19 million have been traded on the upside.
Most people are selling their stocks at a loss today. You're selling them on a downtick. So this is a very imbalanced market. The market needs to see something happen in order to come back. Again, I reiterate to you the percentage drop while very serious, is not a sign that the market is done with this. They think something else will happen and again as I told you earlier, the market is almost a sideshow here. This is about the credit markets. We do not have an ongoing indicator of how serious that situation is.
It's much more serious in the credit market. The way Washington needs to look at this, whatever analogy you want to use. But there's something burning which needs to be put out. What you need to do to make sure it doesn't happen afterwards. We need an extinguisher on the fire. By not doing this bill today, this fire started to spread.
SANCHEZ: Let's suppose that they may be planning to come back and do this thing in the house tomorrow. That would be Tuesday, and then Wednesday as expected; it would be picked up again in the Senate. How far away are we from the bell?
VELSHI: Four minutes to the bell as we watch this. SANCHEZ: But I guess the question that most people would want to know as they look at this is how much of a window is there? Because we keep talking about -- well the credit market could possibly dry up.
VELSHI: What's going to happen, some companies will not be able to meet their bills so they'll shut down a shift or some might go out of business. It's not one day it's going to happen. It will start to happen on a daily basis.
SANCHEZ: So your point is the sooner we do this, the more that we push that back?
VELSHI: Right. People will be out of their homes and people will lose jobs and it will not be the end of the world. For them, it will be the end of their income and it will be many years before they recover. Save 100,000 Americans from that in the course of the next week by doing it and those are 100,000 more people who can help us get our economy back on track. Unemployment numbers on Friday I guarantee you will not be very good.
SANCHEZ: Most would say this has to get done, whether this week, next week or the next 30 days it, has to get done.
VELSHI: Thirty days is a long time to wait. You'll see companies failing if we wait 30 days.
SANCHEZ: Ali Velshi with a harbinger of things that could possibly come. Thanks to you, Ali.
One quick thing. Let me get some of your comments. You're watching this, thousands of you have been sending your e-mails and your tweets and your responses to my Facebook page and MySpace page. Let's go to the board if we can now.
This is from David Eisner. He says: "Instead of rushing to the cameras to blame each other, Republicans and Democrats should have rushed to each other to fix this thing."
Galaxy5007 says: "It's not her fault", referring to Pelosi. "Maybe some reps agree with the rest of America that this burden shouldn't be placed on taxpayers."
Then Jimnecci says: "Many citizens against the bill and the phone lines and the fax lines were clogged into the house offices with no messages."
Let's go back to Suzanne Lisovicz she is there following the market. It's down in the low 600. But we've seen it come down from 700s. What do you think we're at now?
LISOVICZ: We're seeing a ferocious sell off. You know, on most levels, Rick. It just points to the urgency of the problem. And you know, just to play on what Ali was just saying, it's not like all of a sudden the end of the world is going to occur. What we're already see the ramifications of tight credit. And you know, we know almost every economist will agree that $700 billion is a whole lot of money. But it's not something that's bigger than the U.S. economy.
The U.S. economy is decelerating. It's lost jobs every month this year. Housing prices continue to decline. Wages aren't keeping pace with income. We're going through a downturn. These things happen just like spring and summer come and fall and winter come. They are not pretty, they're painful. What the government is recognizing is that it has to do something at some point to try to get the credit markets to free up because what is a vicious -- what could be a vicious downturn could be even worse, far worse if financial institutions aren't lending money.
And we're seeing it. I mean, we're seeing -- there was, there were reports people are trying to buy homes now. Housing prices have come down enough that people want to wade in. You want to buy a car; maybe your credit ceiling has been lowered. It's that kind of environment we're talking about. And there's the closing bell. We had no opening bell today. It was ominous. I've never lived through it. There is a different sounding closing bell because we had electrical problems today. Back to you Rick.
SANCHEZ: There is the number its 589, 595 may be the final closing, as you look at that number there. It's certainly, as many would say, could have been worse still because we saw it somewhere around 700.
Wolf Blitzer standing by now with both the economic aspect of this story and certainly the political bickering as well -- and there was plenty of that -- Wolf?
WOLF BLITZER, CNN ANCHOR: OK, Rick. Thanks very much -- Rick, thanks very much.
