The sky is not falling, but it is hanging a bit lower and a bit grayer this afternoon with the demise of the bailout bill in the House. Don't all of us who insisted that Congress be involved and improve upon the Treasury Secretary's initial proposal look stupid now.
I go back to Bruce Bartlett's op-ed from Saturday -- those seeking a bill failed to make the case as clearly as they needed to that the financial sector by its nature may need special Congressional help of this sort. They were also disserved by leading with "$700 billion" and then only later noting that taxpayers wouldn't necessarily be on the hook for all of it.
But we -- like the stock market today -- can easily overreact. All this means is that the federal government will have to rely on existing mechanisms to dispose of insolvent banks and to provide liquidity to solvent banks. There is a chance that those mechanisms will be overwhelmed if more financial institutions start to fail in rapid succession. But as of today, they have not, and many financial institutions are recapitalizing on their own and with specific federal interventions.
We could come out of this okay even without the bailout, but by holding back we do take a chance that we will not later be able to act quickly enough. In all likelihood, the financial brinkmanship will continue for a number of months.
The Plan
Here's my problem--there is not a person, Eepublican or Democrat, nor any commentator, reporter, editor, etc. whom I trust right now. Everybody has their spin, and so I can see why some GOP members took a walk after Pelosi's partisan diatribe. Still, even tho I'm a Republican, I'm not sure I believe many actually did so.
The last post said we need sometimes to rely on leadership to make tough calls--the problem is the same people who screwed this all up (I've heard Barney Frank's passionate defense of Fannie & Freddie and as for the Bush people, well, have they run ANYTHING well?) are the same folks who are saying that in 4 days they've solved the problem. I'm still not sure what the problem is--or why I and my grandchildren have to pay more taxes because a bunch of people bought homes they couldn't afford, or took equity loans to pay off the credit cards they ran up on iPods and Wies, or because some (I was going to say Ivy-league hot-shot MBA's, but I don't think that would be nice, huh?)decided to create "financial products" based solely on the theory that they'd lose a little on each sale but make up for it on volume.
Somebody really should be making the case--but we have a President with an approval rating which only exceeds Congress', and a nation so torn by two decades of Borkinazation, I don't know who could possible be the person who could convincingly explain any of this.
Well said
It's tough to explain the virtues of leverage used prudently in soundbites, particularly in this political and media environment.
Sorry about the Mets.
I don't suppose...
Sorry about the Mets.
I don't suppose Paulson would consider some sort of bailout of their bullpen.
Callaway makes a good point
http://www.marketwatch.com/news/story/how-rejecting-700-billion-bailout/...
And personally, I've lost about ten times more in the stock market than my tax burden from the EESA plan, had it passed.
Thanks a ton Congress. You screwed lots of savers . . .especially those of us who are trying to retire in the next 5 years . . . we don't have the luxury of time to recover from these shenanigans.
McCain has lost it. If he can't lead his party now, he won't be able to lead them from the White House . . . he just made that painfully clear to the nation.
Public not sold
Bush is such a poor communicator he has failed to explain the crisis to the public in a way people can understand. On top of that Bush has been so untrustworthy (Iraq WMD, Katrina, etc) that a lot of people no longer believe a word he says.
Suppose an idiot neighbor who made his money by shady dealing owns a McMansion. Suppose the idiot neighbor has allowed brush to grow up (expensive to trim it) against his McMansion next to stacks of firewood. In addition the neighbor bought gasoline when it was cheap and has stored it in his garage. Now, the idiot neighbor has been setting off fireworks that have set his McMansion on fire.
The rest of us cottage owners step up to try to put out the fire at our own expense (which may benefit the idiot neighbor) because the idiot neighbor may burn down the rest of the neighborhood in addition to his own house. It is in our own self interest to pony up to put out the fire. Once the fire is out, it is in our own best interest to enact strict regulations against fireworks and creating a fire hazard. We might try to recover some of our costs from the McMansion owner, but he may have already lost everything.
In order for a bailout to pass, the public has to be convinced in a way they can understand.re
But have they really lost?
I understand your analogy--except one of the things people don't trust is the "he may have lost everything." Too many times we have seen CEO's and others from failing companies walk away with huge, obscene packages--and too many times we've seen people who have made huge profits illicitly pay a fine, do a few months, and walk right back into a life of wealth.
I think if people knew that the men and women who profited from this garbage really were going to suffer, they would be behind this plan--but I think the perception is we're getting taken for a ride--again.
Example? We revised the bankruptcy code because the banks said they were losing too much on their credit card business--did you see credit card rates come down?