Bank Bailout Bingo: How Both Parties Exploit Populist Anger

The congressional votes nearly two years ago were the last gasp of old-time bipartisanship as the warring leaders of both parties united in a crisis to pass emergency legislation that the White House desperately craved. (Yes, it sounds like a children's bedtime story, but it actually happened.) While the legislative route through the House was terrifyingly bumpy, the lopsided 74-to-25 vote in the Senate reflected the establishment consensus, with Barack Obama and John McCain, plus Harry Reid and Mitch McConnell, all voting yes.

Nothing is more emblematic of the poison-pen partisanship of Campaign 2010 than the way that this 2008 vote is bedeviling incumbents in both parties. The Bush administration legislation was the $700 billion Troubled Assets Relief Program (TARP), better known as the bank-bailout bill, a phrase that these days is only uttered with a contemptuous sneer. In his 2010 State of the Union Address, Obama accurately described TARP as "about as popular as root canal" – and thereby risked losing the dentist vote. But the president pointedly added, "If we had allowed the meltdown of the financial system, unemployment might be double what it is today."

Many Democrats in this rush-for-the-lifeboats political season are ignoring Obama's words. In Missouri, Robin Carnahan -- one of the few Democrats with a shot at picking up a GOP-held Senate seat -- has made her opposition to the bailout the centerpiece of her campaign. In a stinging Carnahan TV commercial released Wednesday, the voice-over ridiculed her opponent, Roy Blunt (who in 2008 was the House Republican whip and in charge of rounding up GOP votes for TARP), as "Mr. Bailout . . . the very worst of Washington":


But Republicans are equally eager to exploit populist anger over the 2008 TARP vote. In Washington state, where Obama campaigned Tuesday, this issue is emerging as a major theme in Dino Rossi's campaign against Democratic Senate incumbent Patty Murray, who now says ruefully that the bailout "didn't work as well" as she hoped.

Louisiana GOP Sen. David Vitter, whose re-election campaign has been complicated by his admission that he patronized prostitutes, was one of 15 Republican naysayers who bucked President George W. Bush on the TARP vote. Now Vitter, who still faces an Aug. 28 primary against an under-funded GOP challenger, is going after Democratic Senate nominee Charlie Melancon, who voted for TARP in the House. "The next time you think you just can't work any harder," a woman narrator's voice declares in a new Vitter ad, "just remember Charlie Melancon. Melancon voted to use your money for bailouts for Wall Street millionaires."

All this is, of course, fair game in our amnesiac political culture. But it is worth recalling the 2008 national panic following the collapse of Lehman Brothers as Congress grappled with the hastily written bank bailout bill pushed by Bush Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. When the House initially voted down the bill, the Dow Jones Average plunged by 778 points. Faced with gyrating markets and fears that inaction would be synonymous with Depression, three quarters of the Senate and ultimately 263 House members (172 Democrats and 91 Republicans) risked voter retribution by casting what they believed was a fiscally responsible vote.

Economists on both the left and the right can concoct scenarios under which the markets eventually would have stabilized (probably after another devastating round of Wall Street failures) if Congress had not passed TARP. But it is also easy to imagine how congressional grandstanding and populist posturing could have dangerously compounded the worst fiscal crisis in eight decades. After all, how many Americans trust Congress (regardless of party) to make prudent snap judgments about our collective economic future?

Few during the anxious autumn of '08 anticipated that the economic downturn would be this long-lasting and the bank bailouts this unpopular. Only a cynic (or a Marxist) could have guessed that the surviving wizards of Wall Street and hegemonic hedge-fund operators would be this arrogantly unapologetic after their speculative bubbles almost brought the world to the brink of a barter economy.

The bank bailout has become so unpopular that even members of Congress who were not in office in 2008 now brag that they voted against it. The first TV ad for House Democratic freshman Dina Titus, running for re-election in the Las Vegas area, includes the dubious claim that "she even voted against the bank bailout." Titus, in truth, did cast a totally symbolic vote in January 2009 against releasing the final $350 billion of the bailout fund. But this was congressional flimflam, since the Senate had already voted to guarantee that the money would be sent to the banks.

Polling explains why almost every campaign commercial this fall will feature a variant of this memorable, if hyperbolic, line from a new 30-second spot by freshman House Democrat Betsy Markey, running for re-election in the Denver suburbs: "Bailout is just another word for cop-out. And here in Colorado, that's not how we do business." A July Bloomberg News national survey found that 58 percent of voters believe that TARP was "an unneeded bailout." In Missouri, a survey by Public Policy Polling for the Democratic-leaning website Daily Kos found that 61 percent of voters are (big surprise ahead) "less likely" to support a candidate who voted for the $700 billion bank bailout.

At a time when our national politics is going into convulsions over a mosque being built on private property on a commercial street two blocks from Ground Zero, it may seem petty to complain about how candidates in both parties are demonizing the 2008 TARP vote. But every time Congress as a whole is punished for acting responsibly -- as it did during the 2008 financial crisis -- that lesson reverberates in Washington. That is why during the next crisis, whenever it hits, no one should expect Congress to put the short-term politics of re-election aside for the greater good.