My feelings are so
mixed after this bailout bill failed today.
I read the bill last
night, and again this morning, and I have to tell you; it was a pretty good
bill. Instead of handing $700 billion
over to the Bush Administration in a lump sum, it put the money out there far
more slowly and deliberately, and required accountability all the way down the
line. Given the intransigence of the
Republicans on the issue of oversight (they want none), and their inability to
admit they have ever done anything wrong, it was a pleasant surprise to see a
bill, crafted by both parties that limited the sales of mortgage securities and
closely monitored the market, to make sure taxpayers weren’t being ripped off.
More impressive still was the provision that prohibited anyone from
"unfair enrichment." Okay, so that idea is open to interpretation,
but at least it’s there.
So, I was a little
disappointed that it didn’t pass.
Let’s make something
clear. There needs to be a bailout. Yes, the markets have acted irrationally,
and a lot of crooks have been allowed to rape the market under the Republicans’
watch. And yes, the rampant deregulation of pretty much everything financial
ended up screwing us royally.
But this isn’t about
that, yet. What this bill should be about is keeping the economy afloat until
such time as we get new blood in the government to start straightening things
out. It’s not about funneling money to people who have been screwing the system;
those people took their money and ran some time ago. It’s about protecting our
money, in our banks. It’s about preventing businesses from having to take a
nosedive. And at its very heart, it’s about keeping the grocery stores stocked
with food, and the gas stations stocked with gasoline.
A bailout is
absolutely necessary at this point in time. And while the concept of $700
billion or more is absolutely insane and unnecessary, so is $0. If you think a
$777 drop in the Dow is bad, let this thing go on for another few weeks,
without infusing some money into the system.
If there is a
problem with this bill, it’s that it was foisted on the public way too fast,
and for that, you can blame no one but Republicans. This time last year, the
man who asked us to trust him with $700 billion without oversight, was
dismissing suggestions from others that the economy was heading for
meltdown. The Bush Administration and
Paulson and Bernanke all knew there would be hell to pay if someone didn’t
rescue the mortgage securities market, but instead of warning us ahead of time,
and acting when $50-60 billion may have been enough to fix things, they waited
until total meltdown, so that now, there is no choice but to act rashly.
People have to be
made to understand what this is about, and there hasn’t been time to explain it
in a way that makes Congresscritters comfortable in voting either for or
against it. So, here’s the problem in a very small nutshell.
Because a large
group of get-rich-quick idiots invested too much money in this bullshit
mortgage securities market, when the bottom dropped out of the market,
investment banks started failing. The problem now is, the amount of money
available for credit is now at a very risky level. When home prices dropped,
the mortgage securities market crashed. Since there is no way to tell who has
how much in these securities markets, banks are now reluctant to lend other
banks money. And since there is no market for mortgages at this moment in time,
banks who lend money to buy homes are now finding themselves with little money
In other words, the
cash available for credit is drying up quickly. This is a huge deal, because
nearly every business you frequent buys most of the goods you see on the shelf
using credit. If the credit market dries up enough, not only will the stock and
bond markets crash, but you may either find it more difficult to find certain
items on your shelf, or you will have to pay a lot more for them. And consider
this; gas is $3.50 per gallon without a shortage; if credit dries up, we could
face a shortage, and then you’ll really see prices go up.
In other words, a
plan has to be passed. It’s imperative. If not a plan, then a stopgap measure
to ease the problems in the credit market.
That doesn’t mean
the bill passed should be a giveaway. The bill that was hashed out last night
and voted on today wasn’t perfect, but it was miles better than the one Paulson
scraped together 10 days ago and handed over. And for those of you who are reticent to hand over too much authority to
the Bushies, the bill required them to report to Congress on every detail of
the plan, and even required oversight with regard to the prices paid for
securities. Instead of $700 billion, it’s possible that this bill may have only
cost $200 billion, and that taxpayers would have actually seen a positive
And keep this in
mind; in a little over a month, we elect a new president and a new Congress,
and in just over 90 days, a largely Democratic Congress will be able to look at
the results and make any adjustments they find necessary, and about 17 days
after that, President Obama’s Justice Department will be able to go after the
crooks and get a lot more money back.
But make no mistake;
there has to be a bailout, no matter what the polls say.
Copyright 2008 The PCTC Blog