Legislative History on the Fly: The Wall Street Bailout

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When momentous legislation is passed--think USA Patriot Act after 9/11--the textbook how-a-bill-becomes-a-law process gets chucked out the National Park Service-maintained neoclassical window. Shadowy drafts are circulated as the political branches negotiate--then a deal breaks and the legislation is hurried through Congress in a furious rush. No full hearings, detailed conference reports, or extended debates. Try finding much documentation later on USCCAN or Thomas and you are out-of-luck.

The Wall Street bailout law looks like this kind of situation but, thanks to the Internet and the news & politics blogs, at least we get to see the shadowy drafts:

The feeling is that the House document is the negotiating draft for Congressional Democrats, with the plan offered by Senate Banking Committee Chair Christopher Dodd (D-Conn.) being aspirational (update: this might be wrong). Word is that House Financial Services Committee Chair Rep. Barney Frank (D-Mass) and Secretary Paulson reached agreement on incorporating some changes sought by Congress to the Treasury plan Monday night, so check this page later for more documents.

UPDATE (9/23): Secretary Paulson and Ben Bernanke, chair of the Federal Reserve System, testified before the Senate Banking Committee at 9:30 Tuesday;tape available on C-SPAN. The Senate Banking Committee website has hearing & witness preliminary statements here. After hearing, Sen. Dodd seemed a bit annoyed with Rep. Frank, whose House draft seemed to be the basis of the yet-unseen renogotiations with Paulson (though this might be some good-cop, bad-cop act on behalf of the Dems). Also, Senate Minority Leader Mitch McConnell (R-Ky.) seemed to sign on to parts of the Dodd draft, especially the part capping executive compensation for CEOS participating in the bailout. Given to the tight margins in the Senate, any Dodd-McConnell backed provision will be in the final version.

UPDATE (9/24): Fed Chief Ben Bernanke testified this morning before the Joint Economic Committee of Congress (testimony) . At 2:30 he and Sec'y Paulson testify before the House Financial Services Committee (video). President Bush announces he'll be speaking on national TV in support of bailout. Mixed signals on whether he may support some exec comp caps (with CNBC first reporting he would; then that he wouldn't).

UPDATE (9/25): McCain's dramatic parachute drop into the bailout discussions apparently had one effect: Sen. Dodd and Rep. Frank apparently have stopped sniping at each other and united around a single Democratic negotiating document, the text yet unreleased. McCain and Obama joined in bland statement, and President Bush made a speech urging Congress to pass the Paulson plan. This morning Bush, the two presidential candidates and other involved parties will meet, likely producing another plain vanilla text. Nonetheless, despite the photo-ops, Treasury and Congress continue to negotiate and all signs are that an agreement of some kind will emerge in the next day or so--unless the McCain gambit has so injected presidential politics into the delicate talks that the progress is frozen. LATE UPDATE (9/25): President Bush's meeting is an apparent disaster with House minority (GOP) leadership rejecting the Paulson-Congressional leadership plan. The House minority leader Rep. John Boehler (R-OH) pitches a new GOP plan, blindsiding everyone (except perhaps McCain). Everyone leaves angry and there is no joint statement. Speaker Nancy Pelosi (D-CA) insists that she isn't going to pass the bill with only Democratic votes and allow the GOP to rail against it in campaign ads; Frank & Dodd blame McCain for scuppering deal.

UPDATE (9/26): Day begins with foreign exchanges and US futures market in slide. Congressional leadership restarts talks with Paulson. Appears to be two options: (1) accept elements of House GOP plan to get consensus (this might however lose Democratic votes); (2) the Bush administration must sweeten the deal for Democrats, including billions more money to prevent foreclosures & perhaps a promise of no Bush veto on a stimulus package Pelosi is pushing, so that the Democratic leadership can go ahead without as many GOP votes. Looks like there are enough votes in the Senate so the House is the ball game. UPDATE (midday): Reuters is reporting that a 102-page draft proposal is being circulated; I'm trying to find the text.

UPDATE (9/27): Reuters is reporting the major features of the 102-page draft being negotiated. (No luck yet finding this text). Talks continue along the lines pursued before the disasterous White House meeting, despite the House GOP revolt, although there are efforts to add a provision from the GOP plan that would give the Treasury secretary the option to have the government insure some distressed mortgage-backed securities and so limit the amount it would have to buy. This is hoped to provide cover so that some GOP House members will support the plan.

UPDATE (9/28): At 5:15pm EST CNN is reporting that the text of a bailout agreement that can pass both houses of Congress has been nearly finalized. Party cancuses are reviewing the plan & Speaker Pelosi is meeting the press. The text is available at speaker.house.gov and financialservices.house.gov but the House website is swamped at this time. UPDATE ON TEXT. Senate Banking Committee has the plan on its website and it is currently functioning. I've mirrored it to UofL Law servers here.

UPDATE (9/29): The bailout bill fails in House; stock markets plunge. Hair on fire, hair on fire.

UPDATE (9/30): The official bill can be found on the front page of Congress' Thomas website (thomas.loc.gov). Interestingly, it was offered as an amendment to the Senate Amendment to H.R. 3997, the "Act to amend the Internal Revenue Code of 1986 to provide tax relief and protections for military personnel, and for other purposes, " the "other purposes" being (in this case) to serve as a vehicle to get the bailout before the House ASAP. (To confuse things more, this bill was known until recently as the "Defenders of Freedom Tax Relief Act.") NOTE: Since this attempt to pass the plan failed, it is possible that another piece of legislation may be chosen if the rescue plan returns for another try. I've heard reports that the Senate may take the lead on Thursday, which would likely neccessitate a switch, further tangling the legislative history. (UPDATE: This proved true, see below).

UPDATE (10/1): Senate plans to vote after sundown today on the rescue plan, as a substitute to HR 1424. The new bill revives a failed Senate version of the bill to revise the Alternative Minimum Tax that had failed in the House but is supported by House GOP members (and many Democrats). The bill also has disaster relief and other features that have balloned the text up to 451 pages. By the way, HR 1424 was originally written to ban genetic discrimination in regard to health care and employment (and was passed as such by the House), but the first line of the substitute completely strikes that language and inserts the bailout bill in the hollowed out husk. (Ironically, the original bill was named after the late Sen. Paul Wellstone of Minnesota, a liberal crusader who was not known as a great friend of Wall Street). Yet another legislative history cul-de-sac is laid upon the record. UPDATE: The Senate passed the bill at around 9:15pm EST by a 74-25 vote. McCain, Obama and Biden voted "aye." Sen. McConnell voted yes; Sen. Bunning voted no.

UPDATE (10/2): Indications are that the House will vote up-or-down around noon Friday on the Senate version without any changes, unless the party whips believe there are not enough votes.Those whips are working extra diligently that there are no surprises for the leadership like there were on Monday.

UPDATE (10/3): At 1:26 PM EST the US House passes the rescue bill 263-171 in the form sent it it by the Senate. (AP roll call here). Bush President signs the bill into law just after 3PM EST.