Bailout remorse

A case of Wall Street whiplash. The Dow rebounds, as Congress hints of a change of heart

Published September 30, 2008 8:25PM (EDT)

Some of the House members who voted against the bailout are having "second thoughts," said Christopher Dodd, Chairman of the Senate Banking Committee, on Tuesday.

Why might that be? One reason: Bloomberg reports that the message from constituents on Tuesday changed drastically in the wake of Monday's market debacle.

"A lot of people called to complain about losing their shirt," said Sean Brown, press secretary for Republican Representative Joe Barton of Texas, who opposed the measure.

Calls have gone from overwhelmingly against the bill to about 60-40 or 70-30 in favor of it, Brown said.

Another reason: According to one rumor running around the Capitol, many of the House representatives who gave the bailout plan a thumbs down were assuming that the bailout was guaranteed to pass, thus making their gesture of defiance safe. Wrong.

Throw in a commitment to raise FDIC insurance from $100,000 to $250,000, mix in some encouraging words from the SEC on allowing changes to how companies may interpret the mark-to-market rule, and add in the strongest support yet for the rescue plan from both presidential candidates, and suddenly, it's a party on Wall Street again. The Dow closed up almost 500 points.

Earlier today I wrote that I didn't quite see how boosting FDIC insurance would address the root problems of the credit crunch, but George Mason economist Tyler Cowen applauds the move, writing that "the FDIC specializes in concentrating its actions on insolvent banks, which is exactly what we should be doing."

The Senate may try to move some legislation on Wednesday. Any new action in the House isn't expected until Thursday at the least. One thing seems certain: Joe Biden and Sarah Palin will have something to talk about on Thursday evening.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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