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How surprising was the U.S. House of Representatives' vote to kill the bailout bill?

It was so unexpected that when UT economist Matt Murray was told Monday by a reporter that the House had voted, he assumed the financial rescue bill had passed.

"I am not surprised, given where the economy stands today and the ill health of financial infrastructures across the world," said the associate director of the University of Tennessee Economics Department and Blount County resident.

He was commenting on a winning vote. Then he learned the vote had failed.

"I cannot believe it. The tough love society seems to have carried the day," Murray said. "I'm absolutely exasperated."

He said House members apparently were swayed by concerns over the November election.

"I don't think people fully appreciate the gravity of the situation."

Murray appreciates the anger over the excesses and errors of Wall Street, but not the reaction.

"We all agree 110 percent that if a person makes a bad decision, the person making the bad decision should bear the consequences," he said.

"But in this case of bad decisions by a few, everyone will have to bear the consequences. Everyone in the United States and everyone in the global economy will bear the consequences if something is not done to solve this problem."

Duncan voted no

U.S. Rep. John J. Duncan Jr. voted against the rescue bill. Amy Westmoreland, Duncan's press secretary, said 2nd District constituents have been contacting his office to let their feelings be known. Most had a simple message -- don't pass the bailout bill.

So many people were trying to reach their congressmen by e-mail that the U.S. House Web site was knocked off-line.

Vickie Flynn, Duncan's Blount County office manager, said the local office received as many as 80 calls about the bill over the past few days.

"It's been wild up here," she said.

As of late Monday afternoon, only two callers had supported the bill.

Backers of the bill -- including U.S. Sen. Lamar Alexander -- were hoping the House and Senate would pass the measure on Monday and send it to President Bush for his signature. The plan was to wrap it up and adjourn on Monday so members of Congress could return home.

After the House voted down the rescue plan, Alexander, chairman of the Senate Republican Conference, released a statement calling for Congress to try again.

"Inaction in this case is not an option. The Senate will stay here and keep working in a bipartisan way to address the national credit crunch," the press release said.

"Next week we can fix the blame. This week we need to fix the problem."

Professional perspective

Fred Lawson, chairman of BankEast, also is urging action on a new version of the bill.

"We have to have a package. This one probably had something in it for everybody to hate, but doing nothing is opening the door for a downward spiral in this country and abroad. I think the markets are going to tank all around the world."

The pain from inaction won't be restricted to Wall Street, according to Lawson.

"It's going to come home to roost in East Tennessee. Put yourself in the situation of a homeowner who wants to sell their home. Who's going to buy it?" he asked.

"We've seen our stock values fall, bond values fall, house values fall. We'll all pay for the mistakes of a few."

Hoy Grimm, managing partner of the LeConte Wealth Management office in Alcoa, said the financial rescue effort has two basic components -- politics and markets.

"The votes against the bill most likely reflect those representatives' decisions to follow the relatively uninformed position of their constituents instead of accepting responsibility politically and leading their constituents through the problem," he said.

"I don't think the politicians in Washington have done an effective job of explaining why this is a Main Street problem and not just a Wall Street problem, so I'm not surprised the measure failed."

According to Grimm, the reaction of the markets to no bailout also was predictable -- a record 777-point drop in the Dow.

Turn-around Tuesday

He planned to keep an eye on the markets today, starting with Asia and ending in New York.

"The markets could open down sharply in the morning and reverse through the course of the day in a classic Tuesday capitulation. Seasoned traders call this 'turn-around Tuesday,'" Grimm said.

He noted that the government did act on Monday by pumping $600 billion into the Federal Reserve system to provide additional liquidity to the banking industry.

The impact of the credit squeeze is already being felt outside New York and Washington, and property owners may find that brings higher property taxes.

That would happen, for example, when a public utility has to rearrange a bond issue because of the tougher credit climate. A utility's bond rating can be lowered, even though its financial condition is unchanged, and the utility could be forced to amend the agreement. That would cost. The government entity affiliated with the utility could have to raise property taxes to make up the difference.

Grimm pointed out that Lehman Brothers was rated A+ when it collapsed.

Sherry Kasper, Maryville College economics professor, said the House vote was unexpected.

"It was a political thing; that's why they rejected it," she said.

Supporters of the rescue plan say they will try again to get some version of it passed this week.

Kasper said that whatever plan the government puts in place, the new regulations likely will have to be readjusted later.

"This is such unknown territory that I don't think they really know what will happen," she said.

"They're trying to stem the problem. If economic history is a guide, they will have to revisit it."