Lawmaker Reconsiders Opposition to Bailout as Voters Weigh In

By Lorraine Woellert

Oct. 2 (Bloomberg) -- Representative James Gerlach of Pennsylvania was one of 135 Republican lawmakers who scuttled a $700 billion bank rescue three days ago. Yesterday, he found himself trying to explain why he is now leaning toward supporting a measure much like the one he opposed.

``The bill is becoming a much better bill,'' he said at a town-hall meeting of employees of Weston Solutions Inc., a West Chester-based environment and redevelopment company.

As the Senate approved the new proposal last night, he is among the House Republicans who have said they may change their vote. He said his constituents are divided over the bailout, though more are urging him to support it after the House's rejection of the measure Sept. 29 led to a 778-point decline in the Dow Jones Industrial Average.

``It really is split,'' said Gerlach, 53. He now supports the legislation in principle, he said.

Gerlach, who barely squeaked through in the last three elections, is a top target of Democrats this year and has to carefully calibrate his position. This year, he faces a tough re- election battle in a district that has about as many registered Democrats as Republicans, and contains financial-services companies such as Valley Forge-based fund manager Vanguard Group Inc., as well as thousands of middle-class, white-collar voters.

Overnight Shift

After the vote, Gerlach said, phone calls into his office shifted overnight from overwhelming opposition to a bailout to majority support. As of yesterday afternoon, the calls were 2-to- 1 in support of congressional action, he said. The reaction of constituents in districts such as Gerlach's gives a better chance of passage for the bailout plan, which may be brought to a vote in the House tomorrow.

Gerlach said he opposed the original plan because it was ``hastily crafted'' and threatened to ``saddle taxpayers'' with debt. He said he is reconsidering because the new legislation contains more taxpayer protections, increased federal insurance of banking deposits, tax cuts, and greater congressional oversight.

``It's a scary, scary thing,'' he said. ``We can't afford to go through this situation again.''

Gerlach also is under pressure from his Democratic opponent, Bob Roggio, who called his vote against the bill ``ruthless and irresponsible'' and urged his business supporters to complain. The Republican also has been targeted by business lobbyists in Washington, who have activated grassroots networks to get their message to him.

`Wind Shifted'

``He's in a dilemma,'' Roggio said in an interview. ``He took his shot, and the wind shifted.''

Earlier this week, Gerlach's decision to oppose the bailout measure was ``logical,'' said Terry Madonna, director of the Center for Politics and Public Affairs at Franklin & Marshall College in Lancaster, Pennsylvania.

At the time, ``this was a very pragmatic vote, consistent with other House members in swing districts,'' Madonna said.

In the subsequent 48 hours, however, public reaction in Chester County had changed, said Mark Zandi, chief economist at West Chester-based Moody's Economy.com. He said that the Bush administration's marketing of the plan had been inadequate, though ``our business community now gets it.''

Interviews with business leaders in the district confirmed the shift in sentiment.

`Act Now'

``They need to act and they need to act now,'' said Bill Hankowsky, chief executive officer of Liberty Property Trust, one of the biggest commercial landlords in Chester County. ``We're worried about the House. People won't feel comfortable until something clears the House.''

Still, there remains voter resistance to a bailout.

At Weston Solutions, which has more than 400 employees in Pennsylvania, Gerlach said the new legislation is ``measurably better,'' citing increased insurance coverage for bank deposits, tax relief, and changes to accounting rules.

He asked for a show of hands on the plan, and only a handful of the 50 or so participants said they support it; more than twice as many raised their hands in opposition.

``I'm not convinced,'' said Marie Nadeau, a banking analyst at Weston. ``I live within my means, why can't everyone else live within theirs?''

As the meeting adjourned, Weston's chief executive officer, Patrick McCann, thanked Gerlach for stopping by.

``I'd hate to be in his shoes,'' McCann said.

To contact the reporter on this story: Lorraine Woellert from Pennsylvania at lwoellert@bloomberg.net .

Last Updated: October 2, 2008 00:01 EDT

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