It was only Monday that the House of Representatives tipped Washington into chaos by rejecting the $700 billion bailout package. Friday, the same legislative body reversed course and passed the controversial measure by a vote of 263 to 171, throwing its support behind the most sweeping intervention into the financial markets since the Great Depression. So what happened in this four-day period to change the bailout's fortunes so dramatically?
1. Stock Market Drop. While the credit crisis has taken out some of Wall Street's biggest players, it has yet to really hammer Main Street. Before Monday's vote, Americans could still consider the credit crisis a foreign problem—one that hurt fat cats on Wall Street but had no bearing on their own lives. But Monday's House vote changed all that by triggering a 777-point drop in the Dow—the largest such decline in history. With the value of 401(k)s evaporating, Main Street America suddenly had a tangible stake in getting the bailout bill passed.
"Over $1 trillion worth of market value was wiped off the books by the stock market drop,'' said Sen. Robert Bennett, a Utah Republican, Bloomberg reported. "It is ordinary people looking at ordinary pensions, with their ordinary Main Street kind of 401(k) plans, who lost that $1 trillion. And they lost it in a matter of minutes.''
2. Senate Momentum. After the demoralizing defeat in the House, the bailout bill safely passed the Senate on Wednesday by a vote of 75 to 24. The vote gave the measure just the momentum it needed to make a comeback in the House.
3. FDIC and Mark-to-Market Measures. Just as important, the Senate's bill included a host of new provisions designed to broaden its support in Congress. Chief among them was an addition that increased the FDICs deposit insurance cap. Another key measure restated the SEC's authority to suspend a key accounting rule. Critics of the rule—known as mark-to-market accounting—say it has exacerbated the crisis by forcing banks to take big paper losses on devaluated assets.
4. Big Business Push. After the bailout went down in the House, business trade associations of diverse stripes undertook a full-scale lobbying offensive to secure the legislation's passage. They urged everyone from small-business owners to corporate CEOs to contact lawmakers and explain how the credit turmoil is affecting them, Politico.com reported. "I haven't seen the business association community in this town mobilize so immediately and so massively and so pervasively in a long time," Dirk Van Dongen, president of the National Association of Wholesaler-Distributors, told Politico.com. "This is a Code Red."
5. Mounting Fears of a Recession. As if the economic outlook wasn't gloomy enough already, data released over the past couple of days has stoked recessionary fears further. The government said Thursday that factory orders dropped sharply and jobless claims were at their highest levels since just after the terrorist attacks of Sept. 11, 2001. Friday, just hours before the vote, the government reported that payroll employment dropped by 159,000 jobs in September. "The employment report is clearly in recessionary territory," Goldman Sachs economists said in a report. Sen. Charles Schumer, a New York Democrat, said in a statement, "The problems of Wall Street have now hit Main Street with full force."