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June 4, 2012

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LETTER FROM WASHINGTON:

How Reid rode to the rescue after bailout rejection

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Sunday, Oct. 5, 2008 | 2 a.m.

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About 7 Monday evening, after House lawmakers stunned Washington and Wall Street by rejecting the painfully crafted $700 billion bailout bill, Senate Majority Leader Harry Reid headed home to sleep on what to do next.

Ideas had been flying all afternoon. The newscasts showed endless loops of the stock market’s largest one-day nose dive in history. Lawmakers and aides in the Capitol were being bombarded with questions over what happens next.

Both parties, in both the House and the Senate, were trying to figure out the path forward, convinced they must act swiftly to avert what lawmakers thought could be the biggest economic crisis in generations.

Reid had been on the phone many times with House Speaker Nancy Pelosi. He met with his leadership team. He heard from advisers. He listened to his senators. He talked with the White House and to Democratic presidential nominee Barack Obama.

The House bill failed that Monday by 12 votes, killed by an unlikely coalition of skeptics from the right and left, fueled by the populist anger of constituents.

Not even the urging of President Bush, or the blessing of the two presidential candidates and leadership of both parties, could persuade reluctant lawmakers to sign on.

Voters were outraged at the prospect of spending $700 billion to bail out the fat cats of Wall Street with the unprecedented plan to have the government buy up securities while the middle class is enduring enormous pocketbook losses this year. Nevada’s unemployment is higher now than after the 9/11 attacks.

Reid’s performance as leader of the Senate after two years of partisan gridlock in Washington now faced a pivotal challenge.

Democrats could have used their muscle in the House to go it alone. Perhaps they might try to appeal to Main Street by adding on unemployment insurance extensions or jobs-rich infrastructure funds, aides to both parties said.

But Reid knew a bill loaded up with extra spending would not fly with Republicans in the Senate, where the minority enjoys great legislative power to block bills.

He emerged Tuesday morning with a plan.

Reid believed he could attract Republicans in the House without losing those in the Senate by tagging onto the bill a popular package of extended tax breaks that were set to expire at year’s end.

Support for the tax breaks is bipartisan. They benefit almost every type of constituent. Yet the package had been held up as House Democrats insisted that the credits be fully paid for by new revenues and Republicans argued they could continue without a new revenue source.

Adding the tax breaks would open Reid to complaints that he was forcing them on his own party. But Republican leaders told Reid the tax breaks meant dozens of their members would come onboard, a Democratic leadership aide said.

Reid had insisted days earlier that Republicans were going to have to show support, even before two-thirds of House Republicans had voted against the bill.

At 11 a.m. Tuesday, Reid gathered his leadership team in the ornate meeting room near his office on the second floor of the Capitol.

The idea of adding the tax break extensions was floated.

“In the House he was confident that it could pick up additional Republican votes,” a Democratic leadership aide said. “Concerns were raised, but overall it received good support. He got the buy-in he needed.”

Reid talked to the White House. He called Sen. Mitch McConnell, the Republican leader from Kentucky, who needed to be onboard if any bill were to move forward.

Then Reid did what he often does at times like this. He started calling Democratic senators. He and Assistant Majority Leader Dick Durbin split the list and called every Democrat to gauge support.

The calls went quickly. Reid is known for being brief on the phone. “He’s a man of few words,” a leadership aide said. The response was a go.

When Reid called Pelosi, he essentially told her this was the Senate’s path forward. She expressed reservations the plan would work in the House. But she didn’t say no.

Later that afternoon, the House Republican Leader, John Boehner of Ohio, “gave a green light and thought it was the way to proceed,” a Republican aide said.

On Tuesday evening, as many eyes were watching the House for the next step, Reid quietly slipped to the floor of the Senate and announced the new bailout bill with, as would become clear shortly, the tax break extensions, to be voted on in the Senate the following day.

Reporters in the press gallery were blindsided. No one had breathed word of the deal. Reid knew better than to let the agreement circulate until it was sealed on the floor.

The following evening, senators who normally dash in and out for votes sat at their desks, one by one casting votes. A gallery packed with visitors looked on. Bush had called Reid that morning to express his appreciation. The package passed overwhelmingly, 74-25. Fifteen Republicans and 10 Democrats voted no.

As House leaders spent Thursday rounding up support, the vote was set for Friday.

A cheer erupted on the House floor at 1:20 p.m. Friday as the vote tally passed the 218 needed for passage.

The bill was approved 263-171, with 58 more lawmakers onboard — 32 additional Democrats and 26 additional Republicans.

House Majority Leader Steny Hoyer said afterward that Democrats supported the bill “in spite of” the tax add-ons, which he thought Reid had forced on the House.

Democratic Rep. Barney Frank, the chairman of the Financial Services Committee who had led negotiations between Congress and the White House, said the bill could have passed without the Senate-led tax package.

“I don’t think the tax extenders won us any votes,” Frank said. “What changed votes was the economic reality.”

Republicans were more circumspect.

Roy Blunt, the Republican whip, said probably as many Republican lawmakers who complained that the tax package should have been done separately saw it as attractive to their support of the bailout.

Two weeks earlier, as Bush’s Treasury secretary, Henry Paulson, assembled congressional leaders for a rare evening meeting to divulge the dire economic troubles facing the country, Reid asked: “Do you know what you are asking me to do? It takes me 48 hours to get the Republicans to agree to flush the toilets around here,” The New York Times reported.

But eventually, he helped engineer one of the fastest deals ever.

As Pelosi, flanked by her leadership team, signed the bill Friday that would be sent to the president, Reid was nowhere to be seen.

In a note from his BlackBerry, he simply told an aide it had been a long, tough couple of weeks.

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