While the bill did allow the government to prop up institutions in situations that could lead to a financial catastrophe, those actions would be paid for by a fund financed by a fee on financial institutions – not taxpayer money. In these situations, the government would be empowered to fire all of the top management of the institution in question. The government could extend loan guarantees for banks and financial institutions only if they were solvent, and only in the event of a liquidity crisis (This refers to a “frozen credit market,” in which financial institutions stop lending -- which can have disastrous economic effects.). 

Rep. Spencer Bachus (R-AL) urged support for the motion: “This motion to instruct directs the conferees to insist that this legislation end the possibility of taxpayer-funded bailouts once and for all by stipulating that bankruptcy is the only available option for liquidating a failed financial firm…. if you read the bill, in reality, it is nothing less than the taxpayer-funded life support to pay off the creditors of the failed institutions but not necessarily all of the creditors.”

Rep. Barney Frank (D-MA), the chairman of the committee that drafted the bill, argued that the motion to recommit sought to do more than simply prohibit bailouts. Rather, he contended the proposal would have prevented the government from taking action to prevent an economic catastrophe resulting from the collapse of a major financial institution: “The question between us is this: When an institution that has gotten overly indebted is put out of business, as this bill requires it to be, do you simply do that and ignore the consequences or should there be some capacity in the Federal Government to look at the consequences?”


Frank, also argued that Republicans were simply inventing fictitious controversies in the bill based on blatant misrepresentations and distortions: “…We have just seen an elephant stick wielded on the floor of the House. The elephant stick refers to the man who's walking around the Mall here in Washington carrying a big stick, and people say, Why do you have that big stick. He said, Well, I've got to keep away all the elephants, and the people say to him, Well, there aren't any elephants here, and he said, Right, my stick works.”


The House rejected the motion to instruct conferees by a vote of 198-217. All 170 Republicans present and 28 Democrats voted “yea.” 217 Democrats voted “nay.” As a result, the House did not instruct the conference committee to prohibit the federal government from stabilizing troubled financial institutions under any circumstances.