Finding the Votes
The stock market closed a few minutes ago and today's increase of 485 points in the Dow Jones Industrial Average is indicative of the view that Washington is moving past the shock of yesterday's House vote and towards a new push to enact a financial rescue package.
Key leadership players have been working hard today to rally the troops and change the package in ways that will garner additional votes in the House. The White House conducted a series of outreach calls today to groups ranging from GOP "insiders" to representatives of state and local government and other advocacy organizations. All of this was designed to drive home the point that action is needed on a plan very much like the one put before the House yesterday. Congressional leaders have been doing likewise. Individual Members of Congress -- many of whom have gone home for the two day Rosh Hashanah break -- are also hearing from their constituents. Given the recent tenor of constituent input, that may not be helpful.
The Administration and congressional leaders are hearing from a variety of players in the recent drama about potential changes to the legislation. As they sort through options, the key judgment call is on where to look to find the votes needed for passage. Democratic leaders could find the 12 votes required on their side by adding back into the plan the affordable housing program. Unfortunately, such a move could cost them even more votes on the GOP side. The same cancelling-out effect would most likely be felt if a capital gains tax was inserted in the plan to gain GOP votes -- Democrats would desert the plan in droves.
A more likely place to look for the needed votes is in the center. A menu of ideas are being considered that would help pick-off needed votes without being overly offensive to Members who voted "yes" yesterday. Some examples include:
- eliminating the mark-to-market accounting requirement
- making mandatory an insurance program to guard against taxpayers losing money in the asset purchase program.
- an increase from $100,000 to $250,000 in the cap of FDIC insurance coverage on accounts
- firming up the provisions calling for Treasury to take an ownership position (e.g. preferred shares) in institutions receiving assistance (the Swedish model).
After the market close today, the SEC announced some "clarifications" of the "mark-to-market" rules that may obviate the need for legislative action in that area.
As noted in our morning report, we believe there are roughly 20 Members of the House who are in that center range ideologically and can be won over. The strength of the plan will certainly be enhanced if Members of both parties contribute to getting to a majority over the next few days.
Current thinking is that a new plan will emerge sometime tomorrow and the House will vote on Thursday. The idea of having the Senate vote first to build momentum is under consideration, but will fade as an option if the atmosphere in the House continues to improve.
