We were warned of credit drying up, of small businesses closing and payrolls not being met and rising unemployment. You could almost smell the soup kitchens, almost hear Franklin Roosevelt's patrician tones, almost hear that "Buddy, can you spare a dime?" music of the Great Depression.
President George Bush told us the rescue deal had to be passed. U.S. Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, Sens. Barack Obama and John McCain, and the massed ranks of America's newspaper editorial boards all said the same.
America's elites had spoken as one. Grit your teeth, hold your nose, and pass the $700 billion rescue package.
But the sky did not fall Tuesday. Despite Monday's 778-point drop in the Dow Jones, despite the $1.2 trillion wiped off the value of American stocks, despite the failure of inter-bank lending and the anguished groans of the elite, the New York stock exchange recovered. It gained back almost 500 points of Monday's drop.
In Europe, the Dow Jones Euro Stox 50 was up 1 percent, London's FTSE 100 index rose 2.4 percent, and Paris rose 2.2 percent.
This was not supposed to happen. The 228 recalcitrant members of Congress who voted against the package were supposed to unleash fire and brimstone upon us all. It didn't happen, and this is very odd.
It may be that investors thought this but a momentary aberration on the part of Congress, soon to be repaired once the House of Representatives reconvenes on Thursday, with their more sensible Senate colleagues firmly expected to pass the rescue bill on Wednesday. Possibly the Europeans started putting money back into the markets because they assumed that after its brief rebellion, the U.S. Congress would dutifully do the right thing when it voted again.
Maybe, but European investors are not usually that gullible. The more likely explanation is that they thought a rescue package would eventually get passed, which would make stocks rise, so the moment when they had plunged in despair would be a good time to buy them cheaply.
But they had to take the risk that Congress might not in the end vote for a rescue package, at least one that looks like the bill that was rejected Monday. And the interesting feature of the vote against the bill was that it was in effect bipartisan. A total of 133 Republicans and 95 Democrats voted against it. And while the Republicans have come in for most of the criticism for their "irresponsible" vote, the Democrats have been less closely studied.
It is interesting that majorities of both the black and the Hispanic caucus voted "No," and even more interesting that a large number of Democrats were given a pass by their leadership to cast a "No" vote. They included 16 freshmen, all from seats that were won with small majorities in 2006 and could go Republican again. So with an eye to their re-election in November, they were allowed to vote against a bill that is highly unpopular in the country as a whole, where it tends to be depicted as a way to make taxpayers bail out Wall Street fat cats who deserved to lose their shirts anyway.
House Speaker Nancy Pelosi's own palace guard, her loyalist committee chairmen, were all given the nod and wink to vote "No." John Conyers, chairman of judiciary; Collin Peterson, chairman of agriculture; Bob Filner, chairman of veterans' affairs; Bennie Thompson, chairman of homeland security; Gene Green, chairman of ethics -- all voted "No," along with some of Pelosi's close friends from California.
There was another interesting group of Democrats allowed to vote "No," even though the Democratic leadership was threatening that the economy would collapse and the sky would fall unless the bill were passed. This group was the Chicago Democrats, Obama's friends and neighbors and home guard in the Democratic Party. And Reps. Jesse Jackson Jr., Bobby Rush and Dan Lipinski all voted "No."
The Republicans could see the tactical way the Democrats were voting, and as politicians will, asked themselves why they should take all the flak for passing an unpopular bill when Democratic leaders were not exactly putting themselves out to enact it. And the Democrats asked themselves why they should take the flak for a mess that they blamed squarely on the Bush administration and vote for a bill that had none of the mortgage relief for individuals that their constituents wanted.
And there was a further calculation being made. For the Democrats, it was clear that Obama had begun to establish a lead over McCain in the presidential polls as the financial crisis began to dominate the headlines. The House Democrats were thus in no great rush to fix a crisis that was benefiting their candidate.
For some thoughtful Republicans in Congress, who are beginning to fear they could be on the wrong end of a landslide in November, a question is starting to form. Given that Obama has (according to National Journal) the most liberal voting record in the Senate, just how far to the left will the House, Senate and White House be moving next year? And just how big a Depression will America and the world be facing?