Anatomy of a Legislative Meltdown

Republicans and Democrats talked a lot over the past few days about putting aside their partisan differences for the good of the country to pass a financial markets rescue plan. But they mostly appeared to agree on one thing: that even if they were going to support it, no one much liked the $700 billion bailout bill they had negotiated with the Bush Administration, and certainly no one much wanted to take any credit for it.

So perhaps it shouldn’t have come as such a shock when the House of Representatives failed to pass the bill Monday afternoon, or that the rest of the day was spent in partisan fury and recriminations: Democrats blamed Republicans, Republicans blamed the Dems, the House blamed the Senate, the Senate blamed the House, John McCain blamed Barack Obama, Barack Obama blamed — well, you get the picture. Only one player remained relatively restrained in the aftermath of the defeat, which led to a 777-point free fall for the Dow Jones industrial average, the largest single point drop in history, and a market loss of $1.2 trillion. “We’re not going to play the finger-pointing blame game, which is what today devolved into,” sniffed White House spokesman Tony Fratto.

The most obvious culprits in a legislative meltdown that many warn could take the economy down with it were House Republicans, who had gotten an earful from their constituents disapproving of the bailout and had been strongly against it from the start. After scuttling the first proposed deal last week at a contentious White House meeting, saying they simply didn’t have the votes, House Republican leaders forced a renegotiation of the bill, moving it further to the right to make it more palatable to their members. Then, after marathon talks over the weekend, an agreement was struck in the wee hours of Sunday morning, and the GOP House leadership quickly got behind the deal. “We are supporting this bill,” House minority leader John Boehner told reporters Sunday night, adding that he was asking members to vote for the measure.

But the rank and file weren’t necessarily ready to play follow the leader. Chasing Boehner and his deputies down the Cannon House Office Building’s marble stairs, reporters asked if the party’s top dogs believed they would get enough votes. They expected “substantial support,” barked Representative Roy Blunt, the second ranking House Republican, who represented the House GOP at the negotiations, as he hustled away.

At around 11:30 on Monday morning, as the House drew closer to a vote, Blunt called House majority leader Steny Hoyer to express concern that they might not have the votes. “They thought that momentum would carry it and both sides would keep working; that was the way they left it,” said one Democratic leadership aide familiar with the conversation. “No Republican ever asked to pull the bill.”

But the two parties have different accounts of what led up to the vote. Two Republican recollections of the same conversation had Blunt informing Hoyer that they were short — Blunt counted 60-some GOP votes and was hopeful they could get as many as 75 — and that Democrats would have to make up the rest. Four Democratic sources dispute this version, insisting that they were always promised between 80-90 GOP votes — still short of the 100 votes that would make up a majority of House Republicans, but enough to qualify as a bipartisan victory.

But even some Republicans remarked that their leaders didn’t seem to be trying too hard to get the votes. There wasn’t “some of the bursting of arms that I’ve seen in some votes over the past 12 years,” said Representative Chip Pickering, a Mississippi Republican. Why wouldn’t there be a harder push on such a crucial bill? “The leaders knew people have deeply held convictions on this,” Pickering said. “Everyone knew what the stakes were.”

And the stakes became even clearer once the tally started at 1:27 Monday afternoon. By 1:51, 227 members had voted against it – nine votes more than the 218 majority. By 2:02 p.m., Hoyer and Representative Rahm Emanuel, the No. 4 House Democrat, were in animated discussions on the Republican side of the chamber with Boehner and Blunt. Hoyer “was running around in there saying, ‘The market is falling! The market is falling!’ ” said Scott Garrett, a New Jersey Republican. Faced with a major GOP shortfall, Democrats refused to force 12 of their members to change their votes for a bill that they had just spent the past week renegotiating in order to garner Republican support, dropping several provisions important to Democrats. By 2:05 the vote was done, failing to pass by a margin of 228-205. In the end, Republicans delivered 37%, or 65 of their 199 members, compared with 60% of House Democrats who voted for President Bush’s “rescue” plan.

Given the beating the stock and bond markets took after the vote, all sides still recognize that something must be passed, and quickly. But with the Jewish New Year celebration starting Monday night, nothing can be done until Wednesday evening at the earliest, and the House is not expected to be back in session until Thursday at noon. Democrats pledged to keep working on a bipartisan basis, though privately many questioned Boehner and Blunt’s ability to deliver their fellow party members.

(Click here for Pictures of the Week.)

(See Wall Street’s worst days here.)

In the meantime, House GOP factions jockeyed to have their proposals included in whatever new bill is negotiated — many boasting that they (unlike their leaders) can deliver the necessary votes if their ideas are adopted. Jeb Hensarling, chairman of the Republican Study Committee, a group of fiscal conservatives in the House, sent a letter to the group’s 100-plus members advocating their involvement in a solution. “House conservatives have authored many alternatives that would work if only the Administration and the Democrat majority are willing to meet us halfway,” Hensarling wrote. Representative Darrell Issa pushed a plan that he has advocated since the beginning of the meltdown to issue recovery bonds. And other ideas were also being touted again, such as loaning the money to Wall Street firms rather than buying their toxic mortgage-backed assets, plus an insurance scheme whereby Wall Street firms would pay to have the securities insured rather than taken off their hands.

House Democrats have two choices: move the bill further to the right to try and get more GOP votes (but risk alienating more Democrats) or forsake bipartisanship altogether and write a bill they like (with such provisions as more aid to ailing homeowners) that can garner enough Republican votes in the Senate and pass without input, or support, from House Republicans. Pelosi, however, has all along stressed the need to have bipartisan support for such a controversial bill only five weeks before Election Day. And some political observers argue that the Dems have very little incentive to take such a risk now that Republicans will likely be widely blamed for the market collapse.

An alternate route, described by two aides as a “nuclear” option, is for the Senate to pass a measure first, then adjourn and force the House to accept the Senate measure. Such a move would need to be attached to an innocuous tax bill already pending before the Senate in order to circumvent a constitutional mandate that all tax writing must originate in the House. “We always keep tax bills available for such situations,” said Jim Manley, a senior adviser to Senate majority leader Harry Reid. “But I don’t see that happening as of right now.”

Coming to a new agreement, however, will require getting past some very bruised feelings. The GOP leadership was quick to point outraged fingers, citing Speaker Nancy Pelosi’s closing speech before the vote as breaking the bipartisan spirit of the proceedings. “The Speaker had to give a partisan voice [sic] that poisoned our conference, caused a number of members we thought we could get to go south,” Boehner ranted to reporters after the vote — as if partisan speeches had never before been heard on the House floor.

The Democrats struck a slightly more dignified tone. “There’s a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis,” House Banking Committee chairman Barney Frank told reporters in a press conference around the corner. “And because somebody hurt [the Republicans’] feelings, they decide to punish the country. I mean, I would not have imputed that degree of pettiness and hypersensitivity.”

More than any individual member on Capitol Hill, no one has more to lose in this debacle than John McCain. By claiming to suspend his campaign and pledging to help bring House Republicans on board, McCain put much of his political capital on the line — to the point that his staff were already claiming credit for the legislative coup Monday morning on the assumption that it would pass. “This is very bad for McCain,” said Clyde Wilcox, a government professor at Georgetown University. “So he interrupts his campaign to fly to Washington to deliver a deal, and then cannot deliver his party? This suggests that everyone is running for cover on this.”

McCain was almost as quick to throw blame around as his GOP colleagues, and his target was, no surprise, Barack Obama. “From the minute John McCain suspended his campaign and arrived in Washington to address this crisis, he was attacked by the Democratic leadership: Senators Obama and Reid, Speaker Pelosi and others,” said Doug Holtz-Eakin, a McCain senior policy adviser. “Their partisan attacks were an effort to gain political advantage during a national economic crisis. By doing so, they put at risk the homes, livelihoods and savings of millions of American families.”

Obama, predictably, swiped back at McCain. “This is a moment of national crisis, and today’s inaction in Congress as well as the angry and hyperpartisan statement released by the McCain campaign are exactly why the American people are disgusted with Washington,” Obama spokesman Bill Burton said in a statement. “Now is the time for Democrats and Republicans to join together and act in a way that prevents an economic catastrophe.” Given Monday’s blame game, the odds of both sides rising to the occasion don’t look very good.

(See Wall Street’s worst days here.)

(See the ten steps to the financial meltdown here and TIME’s photos of the global financial crisis here.)

(See TIME’s Pictures of the Week here.)