Sep. 30, 2008 - Bank Rescue Plan Defeated: What's Next?

Lawmakers are expected to continue negotiations after the U.S. House of Representatives' surprise defeat yesterday of a $700 billion rescue plan, which sent shockwaves through Wall Street.

"What happened today was not a failure of a bill, it was a failure of will," said Banking Committee Chairman Chris Dodd, D-Conn. "Our hope is that cooler heads will prevail, people will think about what they did today and recognize that this is not just scare tactics, it's reality."

Here’s what could happen next:

• The bailout plan could get revived when Senate leaders reconvene on Wednesday. Senate leaders who backed the plan could debate it, which would then give a nudge to the House when it returns to Washington on Thursday.

• The proposed rescue plan by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke could be abandoned altogether and a bill that has more Republican support could be proposed instead—although this is viewed as unlikely.

• The existing plan may be tweaked and include more lawmakers from one of the parties to garner greater bipartisan support. For example, proponents will aim to sway moderate Republicans who would be likely to flip after winning some concessions on the legislation. Also, Republicans in California and the Southwest could feel pressure to back the government's rescue plan since their residents are particularly facing a slumping housing market.

Source: Reuters, Patrick Rucker (09/29/08)