Pass this dreadful bailout

YESTERDAY the US House of Representatives - and House Republicans in particular - erred badly by rejecting the $700 billion plan to save Wall Street from its excesses.

In a fair world, Congress would never have to contemplate such a measure. But when a compromise bailout bill came before the House, the only responsible choice was to pass it.

The nation's financial system is in danger of freezing up because institutions, wary of how much soured mortgage debt and credit-default swaps are floating around Wall Street, are afraid of lending to each other. Under the bailout plan, the US Treasury would take so-called bad paper off financial companies' hands and get them lending again. The markets have already begun registering their disapproval of the House vote; the Dow Jones Industrial Average fell 778 points yesterday.

The risk of further economic damage should chasten lawmakers into reconsidering the measure this week.

For years, Wall Street insisted that ever-looser regulatory controls would help money move more freely and efficiently. Instead, investment firms poured vast amounts of money into mortgages to people with bad credit. And these firms got so big that, when those borrowers fell behind, the entire economy was at risk. So taxpayers have every right to be furious about the risk they are being asked to assume now.

As House Speaker Nancy Pelosi pointed out yesterday, "The American people did not decide to dangerously weaken our regulatory and oversight policies." With good reason, Pelosi laid the dearth of regulation at the Bush administration's feet.

After the bill failed, 228-205, House Republican leader John Boehner blamed Pelosi, complaining that her speech "poisoned our conference, caused a number of members that we thought we could get, to go south."

Oh, come on. While most Democrats were willing to take the heat for an unpopular but necessary bill, Boehner got less than a third of his side to vote for a bill advanced by a president of his own party. Are House Republicans really so timid that a few tough words from Pelosi will scare them off? (Meanwhile, John McCain's campaign bizarrely blamed Barack Obama and congressional Democrats for the bill's failure.)

Treasury Secretary Henry Paulson first proposed a massive bailout with little oversight. Pelosi and other Democrats, most notably Representative Barney Frank, won important concessions, including pay limits for executives of bailed-out firms and provisions that would help taxpayers recoup some of their money.

The need for a bailout remains an outrage. But this much-improved bill still needs to pass - and quickly.