The Inside Story Of How Congress Sent The Stock Market Tumbling

Everyone in Congress knew the 2008 bailout was politically toxic, but it was supposed to pass. When it didn't, there was no Plan B.

WASHINGTON ― Nearly nine years ago, the country was sliding into the Great Recession. Wall Street banks were collapsing. Everywhere, people were losing their homes to foreclosure. The unemployment rate was spiking. The Bush administration, hobbled by the Iraq War and the aftermath of Hurricane Katrina, was desperate to put together an economic relief bill that could, for the moment, stop the bleeding. Congress was loath to trust then-President George W. Bush and bail out Wall Street ― especially on the eve of a presidential election.

All of this came to a head in early September 2008, when the House of Representatives was set to vote on a $700 billion relief bill.

This week’s episode of HuffPost’s “Candidate Confessional” podcast is about that fateful, failed vote, which sent the stock market plummeting and embarrassed both the White House and Congress. It is told through a joint interview with two key House staffers who witnessed it all: Michael Steel, who was the press secretary for then-Minority Leader John Boehner (R-Ohio), and Brendan Daly, the communications director for then-Speaker Nancy Pelosi (D-Calif.).

“This is another shit sandwich that we’re going to have to eat on behalf of the administration,” Steel said, describing how the House GOP caucus felt when the bill was first introduced. “Boehner referred to it explicitly in those terms. And it was absolutely clear that this was going to be a totally politically toxic vote.”

Convincing reluctant members to vote for a $700 billion bailout of banks that figured prominently in the economic collapse was always going to be a tricky endeavor. But things took a turn for the bizarre when Sen. John McCain (R-Ariz.) suspended his presidential campaign to come to Washington, as Steel described it, to try and look busy.

“It was bizarre,” Steel said. “He’s a candidate, so he couldn’t just go to his Senate office, so he comes to Boehner’s office and basically spends several hours hanging out in the minority offices on the House side of the Capitol. At this point, various members are coming in to talk to him about the crisis and what they think ought to be done, but there wasn’t like a vetting process or a procedure, so it was sort of any member with the gumption or the thought that maybe I contribute something to the situation.”

Instead of being informed, McCain looked to be out of his depths. He barely spoke when a bipartisan group of leaders met to discuss matters in the White House. At that point, it had become clear that Republican factions were rebelling against the idea of giving the Bush administration more money. But Democrats were, of course, skeptical of anything Bush touched, too.

“Even though everyone agreed that we needed to do something, we weren’t just going to give a blank check,” Daly explained.

Despite misgivings within both parties, there was an understanding among leadership that each side would bring enough votes, so that the bill would pass, since the alternative ― failure ― was unthinkable. But when the legislation reached the floor, the numbers just didn’t materialize. Republicans blamed a speech from Pelosi that cast blame on them for getting into this mess. Democrats, led by then-Rep. Barney Frank (D-Mass.), mocked the idea that hurt feelings had compelled Republicans to tank the economy.

Both sides were stunned as the Dow stock market index kept falling.

“You’re like, ‘What the hell just happened?’” Daly said.

There was no Plan B.

“House Republican leaders went back into Boehner’s office” after the vote, Steel recalled. “Boehner fired up a Camel and said, ‘What next?’ And we talked about how we needed to do a press availability. We had to offer an explanation for why the vote failed. … And at that point, we didn’t have a plan for what was next.”

Listen above to hear the story about how it all went down.

Candidate Confessional is produced by Zach Young. To listen to this podcast later, download it on Apple Podcasts. While you’re there, please rate and review our show. To subscribe, visit the following: Apple Podcasts / Acast / RadioPublic / Google Play / Stitcher / RSS

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