Bailout fails; Dow freefalls

Hill votes 'nay'

Indiana 9th District Rep. Baron Hill opposed legislation Monday that would provide a $700 billion bailout of U.S. financial markets.

Hill said the proposal, first outlined by President Bush and Treasury Secretary Henry Paulson, was pushed too quickly through Congress.

He wants more time to consider alternatives and the effect on consumers.

"I have been rushed to judgment by the Bush administration before," Hill said after casting his vote.  "There hasn't been enough time to evaluate the impacts this legislation would have if enacted, or to consider alternatives. Congress deserves time to weigh the benefits and the potential pitfalls of borrowing this money." 

One of Hill's challengers in his bid for re-election, Libertarian Eric Schansberg of New Albany, said Hill's "no" vote was the right one but "probably for the wrong reasons."

"From what I understand, he's willing to have a significant bailout with the right conditions," Schansberg said, "but I'm categorically against a bailout."
Their Republican opponent, Mike Sodrel of New Albany, said Hill was "given a pass" by House Speaker Nancy Pelosi.

Katie Moreau of Hill's campaign staff said this morning that was ludicrous.

"That would mean she gave Andre Carson and Pete Visclosky a pass (two other Indiana Democrats in Congress who voted no Monday), and Pete has little or no competition," Moreau said.

"Baron really doesn't check in with the speaker on how he's going to vote, which is clearly reflected in his record," she added. "It doesn't seem likely that Nancy Pelosi would give out enough passes so that that vote would fail."

Overstated case

Schansberg said President Bush has overstated concerns about frozen markets.

"There are buyers, just maybe not at prices people want," Schansberg said.

Schansberg pointed to Monday morning's announcement that Citigroup Inc. plans to purchase the failing Wachovia Corp. as an example.

"At this point, no one knows what will happen if we do nothing, but to me the risks of doing something and the cost is greater than doing nothing," Schansberg said. "We should let the markets do their thing.

"What if $700 billion fails?" he asked. "Then what? We've trashed our dollar further and maybe a couple more banks have failed. At the root of it you're left with having faith in the markets. I don't have much faith in government."

Although Hill said he agrees the financial crisis must be addressed, he said congressional investigation needs to be conducted before members are forced to vote on an unprecedented bill. 

Hill said aside from alterations made to the proposal offered by Bush and Paulson, there have been no alternative proposals offered. Congress must have the opportunity to consider all possible options and take the time to understand the results of what he called a large taxpayer investment, he said. 

"There is no consensus on this proposal," Hill said.  "I have talked with everyone from bankers to neighbors, and there is no one position that stands out amongst them all."

Hill said Monday he will be taking the pulse of area residents in the next few days on how the federal government should proceed following the defeat of a $700 billion bailout of the U.S. financial markets. That pulse-checking includes a stop from 5:30 p.m. to 6:30 p.m. today at Bloomington City Hall.

"While many aspects of the bill were improved through negotiations, we were given a week to pass an unprecedented piece of legislation," Hill said. "All I ask is for more time to evaluate the situation."

 Hill said constituents need more time to assess how such a bailout, also referred to as a federal investment in private enterprise, will affect them, their retirement savings and college savings.

"I voted against the measure, because I believe Congress and the American public have not had the appropriate time to review this massive proposal," he said.

Hill encourages people to "take a breath, examine the plan and identify if this is the response our nation should take."

Sodrel turned to politics in his response to Hill's vote Monday afternoon.

"Congresswoman Nancy Pelosi does not want to lose her position as Speaker of the House," Sodrel said. "She has allowed vulnerable Democrat members like Baron Hill to vote against the $700 billion bailout.  Apparently she believes House members Brad Ellsworth and Joe Donnelly are safe as they voted for the bailout."

Sodrel said he expects the issue to be voted on again this week with a revised version.

"My dad always said, ‘Son, you can't borrow your way out of debt.'" Sodrel said. "The taxpayer doesn't have $700 billion dollars.  The taxpayer owes almost $10 trillion.  They will owe more than $10 trillion if this deal is eventually approved because they will have to borrow another $700 billion in addition to the $400 billion deficit this year."

Like Schansberg, Sodrel said a bailout cannot be substantiated constitutionally.

"The United States Constitution is a document designed to limit the power of our government," Sodrel said. "To give virtually unlimited power to a cabinet secretary would have to create constitutional issues, not to mention poor judgment."

Sodrel said government should not "restrict salaries or bonuses of executives leading successful organizations."

 "I believe the shareholders, lenders and others should be able to recover a large portion of management compensation for those who brought their firms to failure," he added.

He proposed an immediate suspension of the capital gains tax for two years, an increase in FDIC deposit insurance, suspension or modification of "mark-to-market" accounting rules and adoption of the so-called Fair Tax.

"I'm certainly open to discussing other options that do not require the taxpayer to borrow $700 billion," Sodrel said.

Schansberg agreed with Sodrel's proposal to suspend the capital gains tax and to revisit "mark-to-market" accounting rules.

"From what I've read, ‘mark-to-market' accounting rules are the most underrated cause of the current problems," Schansberg said. "Certainly, the sub-prime mortgage mess and government involvement in Fannie Mae and Freddie Mac are at the top of that list. But ‘mark-to-market' combined with aspects of Sarbanes-Oxley seems to be a major contributor."