The seeds of the House Republican revolt over the financial industry bailout were sown in an e-mail circulated Monday night as internal animosity built quickly over the Bush administration's request for $700 billion to prevent economic collapse.
In a message to members of the conservative Republican Study Committee, leaders of the bloc of more than 100 lawmakers solicited ideas, calling for a “free-market alternative to the Treasury Department's proposal so that, regardless of how individual RSC members vote on final passage, House conservatives have something to be for.”
As the week progressed, it became clear that one thing conservative Republicans were most certainly not for was the Treasury plan, prompting a search for an alternative to avoid strictly being naysayers.
By the end of Friday, at least a portion of their alternative seemed likely to be included in the broader proposal, although closed-door negotiations continued into the evening on Friday, and the contours of the final package remained in limbo.
After years of acceding to the White House on a variety of initiatives despite deep misgivings, House Republicans found its latest strategem too much to swallow.
Just as they were trying to reassert themselves as a party of fiscal restraint, President Bush, on his way out, was asking them to sign off of on a $700 billion bailout built on taxpayer dollars, with very few questions allowed.
“You were being asked to choose between financial meltdown on the one hand and taxpayer bankruptcy and the road to socialism on the other, and you were told do it in 24 hours,” Rep. Jeb Hensarling of Texas, head of the conservative group, said. “It was just never going to happen.”
Sen. John McCain spent just 90 minutes in the Capitol on Friday morning. But while there, he issued words of support but also a gentle warning.
“You're trying to protect the taxpayer, hats off to you,” McCain told the House Republicans, as recounted by Sen. Lindsey Graham of South Carolina, a close adviser, who attended the meeting. “Let's try to do something that would make the bill better.”
“But remember, this is an incredibly difficult time that we're in,” McCain then added, according to Graham. “Don't go too far.”
McCain did not explicitly side with the House Republicans who had derailed the deal on Thursday. But by keeping his views to himself, he kept the House revolt alive. The move infuriated the White House and congressional Democrats, but brought him accolades from House Republicans, who say McCain at least helped get their voices heard.
The resistance caps two years of mounting frustration among House Republicans after losing the majority in 2006. They believe they have suffered serious mistreatment at the hands of ascendant Democrats and that they have been marginalized in legislative negotiations since they, unlike their Senate counterparts, do not have the procedural weapons to force their way to the negotiating table.
They also complain that Treasury Secretary Henry Paulson has been too quick to bargain mainly with Democrats, led by Speaker Nancy Pelosi of California and Rep. Barney Frank of Massachusetts, not only on this plan but on the initial stimulus proposal earlier this year, a subsequent housing bill and other economic measures.
The Monday e-mail message, which led to a statement of principles that many other conservatives embraced, became their manifesto. By Thursday, a legislative alternative was circulating, one centered on federal insurance for mortgage assets combined with tax cuts on investment gains. When Rep. John Boehner of Ohio, the Republican leader, put that alternative on the table at the White House on Thursday afternoon, a verbal brawl broke out, scuttling a grand compromise in the works and forcing negotiators back to the table.
Republicans took pains Friday to make clear they recognized some government intervention was necessary. “People want to see a deal made, no question about it,” said Cantor.