Why the Financial Rescue Failed and How to Rescue It

Washington is stepping back from yesterday's debacle in the House of Representatives and taking a deep breath. Yesterday's surprising 205-228 defeat of the financial rescue plan has caused leaders of both parties to assess the situation within their caucuses, and they are thinking about what is required to gain passage of the package. Our first report today will focus on an analysis of the vote yesterday. Our second report will discuss potential changes to the plan that might garner the necessary votes.

Our analysis suggests that if leaders make carefully selected changes to the package, the votes will be there when Congress returns on Thursday. We draw that conclusion after a careful review of the roll call in the House.

Overall, the best way to sum up the vote is this: Members who are the most liberal, most conservative, in tight races and running for the Senate voted no. Behind that general assessment there are some interesting numbers. For example, voting "no" were:

  • 81 of 106 Members of the conservative Republican Study Committee.
  • 16 of 34 Democratic Members from California, Speaker Pelosi's home state.
  • 4 Full Committee Chairs of the House.
  • 7 of 8 GOP Members from Pennsylvania and 3 of 11 Democratic Members.
  • Only 4 of 29 Members from New York, home to many key firms in the financial sector.

Based on our review of the roll call on a Member-by-Member basis, we believe there are roughly twenty "gettable" votes in the House for a package very close to what was defeated yesterday. This includes about a dozen GOP Members and a handful of Democrats who have some combination of the following attributes: seniority, safe seats and moderate records. In addition, our review indicates there are about a half dozen Democratic Members who were probably "released" from their "yes" votes when the House leadership saw the vote would fail.

While our analysis indicates proponents of the plan have reason for optimism, success will depend on how the plan is changed. There is a risk in making changes to pick up GOP Members, some Democrats could be lost. So the calibration of changes is critical.

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