In a panicked atmosphere and amid flaring tempers, Democrats and some Republicans announced before the White House meeting that they had the outline of an agreement, but GOP leaders refused to sign off on it. Liberal and conservative interest groups railed against the bailout, while business groups insisted that Congress pass the plan with all speed, warning that tight credit already is sharply slowing business activity.
At the White House, Republican leader John Boehner expressed misgivings about the plan, and McCain would not commit to supporting it, people from both parties who were briefed on the exchange told the Associated Press. In the Roosevelt Room after the session, Treasury Secretary Henry Paulson literally bent down on one knee as he pleaded with House Speaker Nancy Pelosi not to withdraw her party's support for the package over what Pelosi derided as a Republican betrayal, according to the New York Times.
There is little doubt among economists that a recession has begun. The question is how deep and long it will be, and that depends on whether the bailout plan, if it passes Congress, works. Another possibility is a long stagnation like Japan's "lost decade" of the 1990s, which followed a similar real estate market collapse in that country.
Either way, the nation faces what Berkeley economist Barry Eichengreen, an expert in financial panics, calls unavoidable consequences.
These could include big budget deficits, higher taxes to service that debt, higher interest rates and more-strictly regulated banks that will lend more cautiously. "We've had a decade of relatively successful economic growth and have been living beyond our means," Eichengreen said. "Now we'll have a decade of the opposite. It's payback time."
Maybe credit markets would recover on their own, as some believe, or maybe they wouldn't. But few in Washington really want to find out.
On the other hand, few in Washington want to be the ones who authorized the bailout, especially on their own. Remember that the people who gave us the initial rude draft proposal are from the Bush administration. Now the Republicans in the House pretend to have nothing to do with those people.
Here's another story about the same events.