Defaulting banks - where will it stop?

[David Guyatt]

http://newsvote.bbc.co.uk/mpapps/pagetoo...646181.stm

Will the public buy a new bail-out plan?

Analysis
By Steve Schifferes
BBC News

Missouri voters are sceptical about the bail-out deal

The public is deeply divided about the wisdom of bailing out Wall Street. It may take more than tactical manoeuvring to pass a bill that gains popular support.

After the shock defeat of the $700bn bail-out bill in the US House of Representatives on Monday, the Senate passed a new version of the bill on Wednesday, which added additional protection for depositor savings and some tax breaks for small business.

But the changes are not substantial enough to change public attitudes - although they may influence some Republicans in the House, which is set to vote on the package later in the week.

The key is whether the public believes that the financial crisis is both serious and urgent - and whether they think the bail-out is part of the solution.

In fact, the public is even more pessimistic than politicians about the state of the economy, but still much more sceptical about the value of a bail-out.

According to a Rasmussen poll conducted on Monday, 41% of the public are "very concerned" that the US will slip into a Depression similar to the one triggered by the stock market crash of 1929.

Nevertheless, the public is deeply split over the value of a rescue. Some 44% of the public say that Wall Street should take care of its own problems, while 45% back Congressional action to solve the financial problem. Only 45% say the rejection of the plan will hurt the economy.

According to polling by the Pew Research Center, support for a bail-out plan has actually fallen from 57% to 48% in the past week (surveys conducted between 19-22 September and 27-29 September).

Blaming Wall Street

Democratic voters appear more concerned than Republicans that Wall Street is getting a free ride.

According to the Pew poll, 77% of Democrats (compared with 69% of Republicans) say that they are very concerned that "those who are responsible for causing this crisis will be left off the hook".

That finding suggests that tougher measures to limit the gains on Wall Street, and executive pay, may be needed to gain public backing.

Democratic voters are also particularly sensitive to the concern that the bill will not do enough to help homeowners in danger of losing their homes.

Here the partisan divide appears greatest, with 66% of Democrats, but only 37% of Republicans, sharing this worry.

This split explains why the Democrats in Congress failed to get provisions to expand help for homeowners into the bill.

Mistrust of Washington

The amount that the bail-out will cost the taxpayer is a crucial concern for many voters, especially Republicans.

In an earlier Rasmussen poll, those who thought that the government would get most of its money back from the bail-out plan (as the US Treasury claims) supported it by a two-to-one margin, while those who thought the government would not get any money back rejected the deal by 61% to 18%.

And among those who oppose the bail-out, 60% say the government is getting too involved in financial markets - while just 33% of those who support the bail-out hold this view.

But even so, a majority (58%) of those supporting the bail-out say that they are concerned that "government action won't fix the things that caused the problem", according to Pew data.

One reason for that mistrust may be people's doubts about those proposing the plan. The approval ratings of President George W Bush are at record lows, with just 26% of the public giving him a positive rating overall, and 22% approving of his handling of the economy. Treasury Secretary Henry Paulson does not fare much better.

This would suggest that in order to gain support for the plan, the size or cost of the bail-out will have to be reduced, and the presidential candidates will have to give a stronger endorsement.

Looking for 12 votes

The partisan nature of the public's differences in attitudes to the bail-out helps explain why it has proved so difficult to fashion a bipartisan deal in Congress.

In their tactical decisions, Congressional leaders now face a choice.

They could try to pass a bill without Republican support by adding more measures to help homeowners, which would bring more Democrats on board.

But the leadership may lack leverage with Democratic opponents of the bail-out, many of whom come from safe seats.

And the approach could risk alienating Senate Republicans.

So the leadership seems to be trying to win over some of the Republican hold-outs by trying to add benefits for businesses and savers.

But that has angered some fiscal conservatives on both sides who are already worried by the size of the bail-out, and by who will pay for it.

If public opinion is decisive and the House votes it down again, then a smaller, more targeted bill, which seems to benefit Wall Street less and the voters more, may be needed to build public support for the bail-out.