Bailout

PHOTOS: Chronicling the Obama Family

 

By Jonathan Weisman, David Cho and Paul Kane

Washington Post Staff Writers
Saturday, October 4, 2008; Page A01

Henry M. Paulson Jr. was in his corner office in the Treasury Department on Monday afternoon, too nervous to turn on his television, when his chief of staff poked his head into the Treasury secretary's office to tell him the stunning news playing out on Capitol Hill: The House had just defeated the Wall Street rescue plan that Paulson had helped craft.

Within minutes, Paulson was on his way across the street to the White House, his senior staff hustling to keep up, for a meeting in the Roosevelt Room with the administration's economic team. There was no time for pleasantries, and before everyone had taken their seats, the former Goldman Sachs chief began firing off options.

Should they push for an immediate vote in the Senate? Should the Democratic leaders be flashed a green light to put together a bill that they could pass on their own, without Republicans? Should they make small changes to win over the dozen or so votes they would need on a second try in the House?

Forty-five minutes into the meeting, they were joined by President Bush, who asked the one question no one had considered: If his plan is not working, what is Plan B?

Paulson looked at his boss, then delivered the answer he did not want to hear: There is no Plan B. The Treasury Department and the Federal Reserve had stretched their authorities to the limits, employing obscure powers never before used to keep their fingers in the dikes. The rescue package had to pass.

Yesterday, when the House reversed itself and approved the package by a 92-vote margin, there was little cause for celebration. Lawmakers had just taken one of the most painful and politically damaging votes of their lives. The stock market was sliding. Both presidential candidates had not only aligned themselves with an unpopular rescue plan and an unpopular president. They had actively worked for the bill's passage.

Many at Paulson's Treasury had already moved on to the next big news out of the financial markets: the sale of Wachovia Bank to Wells Fargo.

"There is no joy," said Rep. Sue Myrick (R-N.C.), a rock-ribbed conservative who switched her "no" vote to a "yes" yesterday, even though a Democratic surge in North Carolina is making her once-easy district look increasingly dicey. "I don't like the bill. I'm not going to defend the bill. . . . I had to do the right thing, even though, politically, it might kill me."

In some sense, the crisis atmosphere that has gripped Washington during its struggle to deal with the damage to world financial markets brought out the very worst in the city, precisely the chaotic, partisan atmosphere that voters seem so ready to punish next month at the polls. It also brought out political selflessness and courage, bipartisan cooperation and ultimately a triumph of sorts.

But as drama, it seemed to capture the vacuum caused by an administration in its last months, a bitterly contested presidential race and a Congress facing its own uncertain future at the polls. There were rebellions from left and right, and power struggles between committee leaders from the House and Senate. The sense that no one was in charge was accentuated by the scene on the other end of Pennsylvania Avenue, where Bush addressed the greatest financial crisis of his presidency with mostly brief and dour public comments.

Paulson worked himself to the brink of collapse trying to bring about a deal, but often seemed his own worst enemy, with a political tin ear that infuriated lawmakers and frustrated administration allies.

On the edges were the two presidential candidates, Sens. Barack Obama and John McCain, each following type -- Obama playing it cool and low-key, offering suggestions, working the phones, coming to Washington only when necessary; McCain going hot, suspending his campaign, bounding into the action as a self-assigned mediator above politics, then appearing lost in the disarray until embracing it, finding an unlikely role as an advocate of sorts for House conservatives who were feeling shut out.