Congress voted Monday on a package designed to rescue the financial industry and pull our economy from an expected major downturn. It failed by 12 votes.

That afternoon the Dow Jones Industrial Average fell 778 points, the largest point drop in U.S. history.

I voted for the plan. I did so because I believe Treasury Secretary Hank Paulson and Federal Reserve Board Chairman Ben Bernanke have the nation’s best interests in mind when they say that our economy may enter a major recession, even depression, if we don’t act to free up our beleaguered credit markets. In a sign of the gravity of the situation, it was the first time I can remember the White House and House and Senate Leaders of both parties were in agreement on a legislative decision that was publicly UNPOPULAR. Unprecedented.

A major reason the bill failed was the way it was sold to the American public. It was the White House’s plan but President Bush seemed reticent to support it vocally in public. He left most of the media interaction to the highly intelligent but less than public relations-savvy Paulson. That void was filled by conservative talk radio and the liberal blogosphere who railed strongly against it. Many in the public were left feeling the package was just a sop to Wall Street rather than a proposal benefitting average Americans. Clearly Main Street wasn’t convinced and the flood of calls and emails into congressional offices proved it.

Key aspects included of the proposal voted on Monday included:

• Provides $250 billion immediately to the Treasury Secretary to purchase securitized home and commercial mortgages. Another $100 billion would be subject to the president’s request should more funding be needed. The final $350 billion could be available upon another presidential request but would be subject to a congressional disapproval resolution, which would then be subject to a presidential veto. If the initial $250 billion was able to stabilize the economy, no more money would be released.
• Limits “golden parachutes” that have given departing executives of troubled financial firms millions in severance bonuses.
• Establishes an oversight board consisting of the Secretaries of Treasury and Commerce and the Chairmen of the Securities Exchange Commission and the Federal Reserve. Required to report regularly to Congress.
• Gives profit-sharing “warrants” so taxpayers can gain as the economy recovers.

The major policy prescription I felt should have been included in the bill was to allow bankruptcy judges to modify the terms of distressed mortgages. Both the lender and the homeowner benefit if consumers are able to continue paying their monthly mortgage instead of defaulting on the loan. It was pulled in order to attract Republican support, but I am hopeful it will be reconsidered if we have another vote.

On Thursday, following Rosh Hashanah, the House will come back into session. The thought is that we will take up a revamped version of the financial rescue package. But the way forward remains unclear. Monday’s vote may be one of those historic moments portending disaster. I pray that is not the case. But every day we delay in passing legislation to free up our credit markets is a day closer to realizing what I believe will be an economic disaster that will take years to recover from.