After a week of unprecedented economic and political turmoil, leaders of both political parties were stunned as their bi-partisan plan to bail out Wall Street at taxpayers expense went down in defeat on Monday. With the elections five weeks away, and public opposition to the $700 taxpayer give-away growing fast, members of Congress bucked their party leaders.

Meanwhile the collapse of Wachovia Bank and further bank failures in Europe shared the headlines Monday, sending stock markets tumbling worldwide. The Dow Jones closed Monday down 777.7, its biggest one-day point decline ever.

The vote is a huge defeat for the Wall Street elite and it deepens the political crisis in Washington. Congressional leaders say they will try to cobble together another compromise deal this week, but intense partisan finger-pointing, popular opposition and the pressure of the elections will make coming to a new deal even harder than before. With the threat of a global financial meltdown ever more real, pressure on Congress to act will only intensify.

With or without a Congressional stamp of approval, it appears likely that the Federal Reserve, alongside central banks worldwide, will continue pump billions of taxpayer dollars into credit markets in a desperate bid save their financial system.

Every political grouping in Washington is now trying to assign blame for the defeat of the bailout package. Three out of five House Democrats voted for the bill, while only one in three Republicans did. Most commentators, and the right-wing Republicans themselves, are explaining the vote as a rebellion of free-market ideologues opposed to “socialist” government intervention.

While ideology was no doubt a factor in the vote, it was the fierce public opposition to the bill which really explains the defeat. After all, Congressional Republicans have time and again compromised their opposition to big government by voting through Bush’s bloated budgets. But Bush has led the Republican Party into a deep political crisis, and with tough re-election races around the corner the main calculation for many dissident Republicans is simply preserving their own political careers.

In the last week, members of Congress reported a “deluge” of phone calls and emails from constituents opposing the Wall Street bailout. Most said 90 to 95 percent contacting them were opposed to the $700 billion plan.

This popular outcry testifies to the growing political awareness of working people in the U.S. who are not allowing themselves to be duped by the combined efforts of the two political parties, Wall Street lobbyists, and the corporate media’s endless stream of pro-capitalist commentators. No matter how the politicians spin Monday’s vote, working people should count it as a victory against the goliaths of Wall Street. We need to argue for a bailout for Main Street, not for Wall Street (see our economic proposals at: http://socialistalternative.org/news/article12.php?id=933).

Ironically, in contrast the narrow careerist calculations of right-wing Republicans, it is Obama and the Democrats who have gone the furthest to portray themselves as the responsible defenders of Wall Street interests. Jim Marshal, a Georgia Democrat facing a re-election fight, said, “I am willing to give up my seat over this.” While polls show that voters blame Bush more than the Democrats for the economic crisis, Congressional Democrats are nonetheless going to take heat for their efforts to bailout the Wall Street gamblers at taxpayer expense.

In back-room negotiations over the weekend, the Democrats secured agreement for several token provisions on the bill which they hoped would make it more palatable to working class voters and progressives. However, the bill’s supposed salary caps for “some” Wall Street executives was toothless, and no provisions existed to aid homeowners facing foreclosure, or any other direct assistance to ordinary Americans.

Despite promises, the bill contained no meaningful oversight for how Treasury Secretary Paulson could spend the $700 billion. The proposed independent panel and Congressional oversight committee consisted of a small clique of Wall Street insiders vetted by Henry Paulson, himself a former CEO of Goldman Sachs.

The worst economic crisis since the Great Depression appears to be producing a political crisis of similarly historic proportions. While not the most likely scenario, it remains possible that no substantial bailout package will be agreed upon before the elections, which would have severe consequences for the global capitalist system. The historic irony is that this political crisis is the direct product of the corrupt and careerist culture of Washington politics which Wall Street bribery did so much to create over the last two decades.

For a thorough analysis of the current economic crisis, read: “World Economy: The Great Implosion” at http://www.socialistworld.net/eng/2008/09/26worlda.html