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Introduction
On 25 September 2008, President George W. Bush delivered a speech urging members of Congress to support the passage of a $700 billion federal bailout. The administration's proposal sought to purchase bad debts from failing American financial firms, raise the national debt ceiling by $1 trillion, and grant substantial emergency powers to Treasury Secretary Henry M. Paulson. The president argued that the bailout was necessary to prevent "a long and painful recession (Montgomery and Kane 2008)". Shortly after the speech, presidential candidates John McCain and Barack Obama released a joint statement calling for a bipartisan response to the financial crisis. Democratic House Speaker Nancy Pelosi (D-CA) and Republican Minority Leader John Boehner (R-OH) released a statement highlighting the positive nature of the negotiations (Herszenhorn 2008a).
Despite the enthusiasm of both parties' leaders, the bailout proposal encountered significant difficulties in the US Congress. Members of both parties were forced to weigh a wide array of factors in deciding whether or not to support the president's proposal. Republicans wanted to support the president, but also sought to promote their partisan brand with a message of "fiscal conservativism", and a vote for the bailout would have damaged this. Majority-party Democrats did not want to support the president, but agreed with many of the bill's main tenets. The result was that the bailout legislation (HR 1454) was met with aggressive criticism from members of both parties, and was initially rejected in the House, 228 to 205.1Stocks plummeted in response to the bill's defeat, dropping 7 per cent - a new one-day record (Weisman 2008).
In the wake of the bill's defeat and the Dow's sharp drop, criticism and pressure were heaped on defecting members of both parties. The Senate moved quickly, passing the bill just two days after its initial defeat in the House, by a vote of 74-25.2The House followed suit, passing the measure two days later 263 to 171. Opposition to the bill was fairly dispersed amongst the two parties, with 63 Democrats joining 108 Republicans in voting no.
One month after the passage of HR 1424, Barack Obama defeated John McCain to capture the presidency. The newly elected president and congressional Democrats, who now held...