By Nancy Pelosi
Five years ago Wednesday, when I was the speaker, I gathered the other Democratic House leaders in my office to discuss the latest financial news. I told them that, as a matter of course, Treasury Secretary Henry Paulson briefed me on the state of the markets and the financial system, but had not done so that week.
In that time, Lehman Bros. had filed for bankruptcy; Merrill Lynch had faced failure and had been purchased by Bank of America; and, two days earlier, AIG had survived only after a Federal Reserve bailout.
After the meeting at 3 p.m., I placed a call to Secretary Paulson and asked him to come the next morning to brief the leadership. Then came his stunning response: "Madam Speaker, tomorrow morning will be too late."
At that point, my question was, "Then why am I calling you?" My impression from his response was that the Bush White House did not want him informing Congress of the pending meltdown. But, he said, "You're the speaker of the House; I'm the secretary of the Treasury. You're asking me, so I'm telling you what's happening."
We then planned to meet at 5 p.m. that day, and I invited Federal Reserve Chairman Ben Bernanke to join us. Later that evening, the meeting commenced, with Democratic and Republican leaders from both the House and Senate.
Secretary Paulson described a meltdown and financial crisis from the depths of hell.
When I asked Bernanke what he thought of the secretary's characterization, he said, "If we do not act immediately, we will not have an economy by Monday." This was Thursday night. Everyone in the room was flabbergasted.
'Break the glass' plan
The secretary then told us that Treasury Department officials had studied various models and chose what they termed the "break the glass" plan, which entailed purchasing the troubled assets of financial institutions. When asked why the department hadn't already pursued this plan, he said they were saving it for the next president.
At regular intervals during the meeting, Senate Majority Leader Harry Reid asked Paulson how much this plan would cost. $100 billion? No. Ten minutes later, he asked, $200 billion? Still, no. By the time Reid reached $400 billion, the secretary said that he was getting warmer and that he would give us the figure later.
That night, there was near-unanimous agreement among congressional leaders to go forward. Afterward, the bipartisan congressional leadership stood before the news media with a joint message: Time is of the essence and action must be taken immediately.
On Saturday, Secretary Paulson sent us a three-page draft proposal with a price tag of $700 billion. Again, we were flabbergasted — this time, by the staggering amount and the fact that all authority would be placed in the secretary's hands. Democrats insisted that the final legislation include greater accountability and oversight.
GOP resisted regulation
This would not be a popular vote for members of Congress. Democrats viewed the meltdown as the result of failed policies of the Bush administration. Leading up to the crisis, House Republicans resisted regulation, discipline and supervision. Now, when the walls were about to come tumbling down, they opposed intervention.
Nonetheless, Democrats promised to produce 120 votes, while Republicans pledged 100 votes. When the vote came up the first time, Democrats put forward 140 votes, while just 65 Republicans supported President Bush's approach.
The bill failed. And as it went down, so did the stock market. The Dow dropped 778 points, the single largest one-day drop in the index's history.
Former Financial Services Committee chairman Barney Frank said seeing the impact of the "no" vote on the markets was likely responsible for its ultimate passage days later.
Once it passed, the financial rescue moved forward. Yet one fact became clear: Even before the rise of the Tea Party, Republicans in Congress were not interested in government intervention of any kind.
Today, Republicans have raised the specter of yet another crisis — the prospect of a default on the national debt to which the Bush policies contributed. They are willing to hold the full faith and credit of the United States hostage to their anti-government ideology. This irresponsible action poses a cataclysmic danger to the stability of our markets and the economic security of our middle class.
Five years ago, the economy teetered on the brink of a depression. Addressing the crisis required responsible, bipartisan cooperation and leadership. That same spirit is needed today.
Rep. Nancy Pelosi, the first female speaker of the House, is the House Democratic Leader.