2008.09.29
The bailout flames out
As promised, here is tomorrow's editorial on the failure of the bailout:
The bailout flames out
The House rejected Treasury Secretary Paulson’s approach, even with caveats. It’s time to look for a new way to ease this looming crisis.
Despite dire warnings from President Bush and leaders on both sides of the aisle that economic disaster loomed without action, the House of Representatives failed Monday to pass a controversial $700 billion bailout of the financial system.
The 228 representatives who voted against the bailout either didn’t believe the warnings or cared more about their political future than the nation’s economic future. The latter should be ashamed.
The Dow immediately plunged.
This is about as complex as an issue gets, so clarity is hard to come by.
No one knows if the bailout would even have kept the rot of bad loans from poisoning the entire economy or if some alternative might work just as well to ensure that America’s banks have the liquidity to continue supplying the credit that makes the day-to-day economy work.
In fact, only one point seems truly clear: Many credible voices insist this nation’s financial system is on the brink of disaster.
But the sense of urgency Congress is working under is profound — and that was ratcheted up even further when Citigroup bought Wachovia over the weekend.
As House Minority Leader John Boehner said from the House floor while vainly urging his members to approve the deal, “If I didn’t think we were on a brink of an economic crisis, it would be the easiest thing in the world for me to not vote for this.”
Such dramatic statements from leadership on both sides of the aisle and dire warnings from President Bush were not enough to sway those who opposed the bailout.
What will happen next is also not clear, but after painting such a drastic picture of imminent disaster, Congress cannot simply walk away from this and see what happens.
Maybe a better proposal will come out of this defeat. Many economists have been questioning the wisdom of Paulson’s basic approach. Perhaps a different way to recapitalize the markets can be found — if there is even time to go back to the drawing board.
Berkeley economist Brad DeLong makes a convincing case for temporarily nationalizing failing banks, liquidating those that can’t make it and getting an ownership stake in those that can. That is what Sweden did when it faced a similar banking crisis in the early 1990s.
The New York Times summed up the results of the Swedish approach, “That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.”
Concerns about Paulson’s approach have lingered on both the right and the left. Why not try something that worked during a very similar crisis, albeit on a far smaller scale? Or maybe there is another promising approach. The only devastating response would be inaction.
Clear-thinking about complex issues is never easy to come by in Washington, D.C., especially just weeks before an election. But having made a convincing case that crisis is upon the nation, members of Congress need to buckle down, put partisan interests aside as much as possible, and develop a course of action that can people can accept.
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If the consequences to the economy are so dire by letting the free market work itself out, how can you say these republicans are looking out for their political futures?
They know they are going to get demonized by Democrats and you liberals in the MSM.
Seems to me, they are the only ones putting the country first and politics second. They aren't voting "present" for this one; they are the ones making the hard decisions they were elected to make.
Government caused this crisis. Only the private sector can straighten it out.
Comment by Josh — September 29, 2008 @ 5:15 pm
They'll never go for a large-scale nationalization plan, simply because it wouldn't be politically expedient. This country is deathly afraid of anything that smacks of Socialism, and nationalizing industries is one of the hallmarks of that ideology. I've already heard people bemoaning the "nationalization" of Fanny & Freddy, and even the government's involvement in the other bank bailouts and rescues so far. There's no way that the Republicans would accept true nationalization, and it would be political suicide for the Dems this close to an election.
Comment by Mark — September 29, 2008 @ 5:20 pm
Oh, Bobby! Thank you!
By opposing the bailout plan put forth by the leaders of both parties and Sec. Paulson you, Rep. Bob Goodlatte, took a bold stand FOR continued financial chaos and firmly AGAINST your constituents.
The stock market plunged a record 770-plus points today -- I don't even want to think about what's happening in my 401(k) -- and more financial institutions will be at risk when business starts up tomorrow.
Thanks for adding to the mess.
Look, this is not a happy time for any of us, but this is one of those times when you absolutely MUST hold your nose and vote for what a lot of Very Smart People have determined is the only way to deal with a volatile situation.
You just can't stand beside a skunk and hope it won't spray you. No, you have to take action. You didn't and now everybody at the picnick is going to stink.
Again, thanks so much for your cowardice. I'll remember this on Nov. 4.
Comment by Saintbridge — September 29, 2008 @ 5:24 pm
The best thing that could happen if this thing gets protracted is for the American people to become educated about whom is really responsible for this crisis.
Usually the truth is able to get out when an issue is in the spotlight for a long time. Sean Hannity talked about Jeremiah Wright and Bill Ayers a full year before the MSM media caught on. Right now, only talk radio and the blogs are telling the real story, that Democrat lawmakers are almost entirely responsible for the crisis. As usual, the new media leads the way; then ethe hard-digging vigilant relevant necessary MSM finally catch on when the truth is unavoidable.
Comment by Josh — September 29, 2008 @ 6:10 pm
SB
"hold your nose and vote for what a lot of Very Smart People have determined is the only way to deal with a volatile situation.
Very Smart People?
Barney Frank?
Chris Dodd?
Chuck Schumer?
Farnklin Raines?
Nancy Pelosi?
Harry Reid?
These are some of the 'Very Smart People' who caused this. We should just roll over and give them the nation?
Save us.....
Comment by Nick — September 29, 2008 @ 6:11 pm
DJIA on Bush's Inauguration: 10,587.59 (01.19.01)
DJIA today: 10,365.45
Thanks for the memories Dubya!
Comment by Concerned for the Future — September 29, 2008 @ 8:31 pm
Josh, this is not a liberal or conservative problem. This is your problem and my problem. You are not going to get away with trying to paint this with one brush or the other.
Both parties have members who opposed this bill knowing full well the chaos that will ensue w/o it.
The free market will surely correct itself but not before many folks' savings and retirement plans have been bankrupted. So go ahead, let the "no" voters keep their integrity intact. Rome is burning and they think this is a hoedown and are reaching for their fiddles.
And while we're at it, stop taking your cues from Rush Limbaugh and Bill O'Reilly by denigrating good reporting by calling it "Mainstream Media." Journalists are there to inform the masses of what's going on. Rush & Co. are windbags who only stir up resentment and trouble -- they have not one thing constructive to offer.
Comment by Saintbridge — September 29, 2008 @ 8:45 pm
Josh, You wondered why the republicans would let the bill fail if the circumstances were so dire.
It is really quite simple.
It has already been tabulated today the congressman that voted 'no' are all up for reelection in tight races. They are not thinking country. They do not care. They are more afraid of voting 'yes' with the current hysteria, then what might happen if they vote 'no'.
Sad, but if you look at republican history, very few times have they done the "right thing".
Comment by Joe — September 29, 2008 @ 9:48 pm
Well, it's close to midnight and I'm catching the BBC's report that the Asian markets dropped 5% in early morning trading. It's obvious that Goodlatte and the other reps who voted no to the bailout were scrambling to placate the loud and vocal Know-Nothings in their constituencies. But it's wrong to blame them because your typical Congressman runs away from controversy like those knights in that Monty Python "Holy Grail" movie. No, the obvious failure belongs to the GOP leadership. They weren't able to deliver the votes and they know how bad things are. Bush is the lamest lame duck president ever and he didn't have enough political capital to get the support needed for this bill. McCain's flip-flop on the debate and the bailout was political theatre. It was meant to show leadership, but when he finally announced his "cautious support", the damage had been done. Goodlatte (and the other congressmen who voted against the bailout) needs to understand that the sick feeling -- that fear of losing his job come Election Day after all his diligent beavering -- is what everyone on Main Street feels in the pit of our stomachs. We're afraid of losing our jobs. And after the roller coaster plunge in the stock market after Goodlatte's vote, he deserves to lose his job.
Comment by simon @kins — September 30, 2008 @ 12:18 am
Hey Concerned,
Be careful with the statistics you throw around. There appears to be more than enough blame to go around.
DJIA on January 4, 2007 -12480.69
Price of oil on January 4, 2007 - $55.59 a barrel
DJIA today - 10,365.45
Price of Oil today - $120.92 a barrel
For those who don't know, January 4, 2007 is day Nancy Pelosi was elected Speaker of the House. So for 6 years of Bush, oil was cheap and the market grew. But after 18 months of Democratic Congressional leadership and the price of oil soars and the market tanks. Bush may not be the only one we should be thanking for those memories.
Comment by C Ramsey — September 30, 2008 @ 7:41 am
Actually, Nancy Pelosi was pushing the bill harder than anyone. You'll notice that Rick Boucher voted for it. She just couldn't get the job done.
Perhaps she should put it back up for a vote and do a little less Bush-bashing this time.
Comment by Henry — September 30, 2008 @ 8:17 am
Most of the nay voters were Republicans, and there is sound reason for this as discussed here:
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html
The bottom line is that it was GOVERNMENT intervention in private markets that led to this crisis, and it's Obama who is pushing for bigger government involvement in American's lives. One party on Capitol Hill recognizes this.
Comment by Jim — September 30, 2008 @ 8:18 am
I see blame everywhere on this blog.
The point is 80% of America does not want the tax payer bailout plan.
If Pelosi would have kept her mouth shut this would have passed. Plane and simple.
There is enough blame on everyone.
I keep seeing Bob Goodlatte's fault, its Rush's fault, its Oreilly's fault. Give me a break.
Pelosi couldnt even get all her people onboard and 5 Committee chairman from the Dem party voted against it.
Stop with the lies and falsehoods.
Either learn whats happening or go blog on Nick at night.
Comment by HERB KREBS — September 30, 2008 @ 8:34 am
Psssst Simon... the stock market has NEVER had a ten year period of not making money. Everything will be ok i promise. Can you still go to the grocery store today and can you still go to work? YES! You can! We will be ok
Comment by Marked Man — September 30, 2008 @ 9:08 am
From 1995 to 2007 when Congress was effectively ruled by Republicans, the Dow leapt from 3,834 to 12,463 = a 44% gain. No other stretch comes even close.
Thanks for the memories GOP!!
Its wonderful that we do not have to pay for others mistakes with our own tax dollars, and i do thank Goodlatte and every normal thinking person should as well. The market has ALWAYS made money and will rebound. It will take time to turn back around for sure but it will be alright. There will still be vehicles made tomorrow and next week and next year. I bet i will be able to buy bread every day if i want to. Some company will manufacture a computer next month, someone will buy it, and someone will give it to their son or daughter to go to college this Spring. Everything will be ok people.
Comment by Marked Man — September 30, 2008 @ 9:14 am
I sure am glad this morning's posts all reflect the right's talking points so far today. I would have been disappointed if the lockstep hadn't continued.
C: So, you're going to blame Pelosi for the rise in oil prices? I'm anxious to hear your explanation. Wait, let me guess - it has to do with "Drill, baby, drill". Right?
Henry: Yes, I heard that those house repubs were very upset with Pelosi's expression of fact. And yet, instead of these same repubs backing the Republican President - THEIR and YOUR Republican President - that Pelosi was slamming they decided they were just too upset with her words to be able to support HIS bill - even after McCain "suspended" his campaign and brought everybody together.
I'm enjoying the desperation of the spin...
Herb: The bill was offered by YOUR Republican President. You voted for him right? His Treasury Secretary authored the bill right? McCain didn't bother to read the 2-1/2 pages until last Tuesday right? RIGHT?
Comment by Concerned for the Future — September 30, 2008 @ 9:37 am
There are a series of references to Morning Joe on blogs this morning. This one struck me as the most clearly articulated (http://bhfrik.dailykos.com/):
"there are two newsworthy items from Morning Joe today.
"James Clyburn, who is the House Democratic whip, told Joe in no uncertain terms how the Republicans failed in yesterday's bailout vote. In the days leading to the vote, there was an arrangement for Democrats to supply 118 votes and for Republicans to bring in 100 votes. In the hours leading to the vote Clyburn approached Republican whip Roy Blunt to compare notes. Blunt told Clyburn he didn't have 100 votes, but could get into the high 70's. Clyburn told Blunt that would work because the Democrats would give them a cushion. The Democrats came through, with more than their share of the bargain, but the Republicans failed."
The other news from Morning Joe this morning is Andrea Mitchell reporting that Newt Gingrich was lobbying Republicans all morning to vote against the bailout, calling it a political loser. Yet when it became clear that the bill would fail, Gingrich issued a statement claiming he would have voted for the bailout."
My question about this is: What is that awful smell?
Comment by Concerned for the Future — September 30, 2008 @ 9:56 am
This blog is exactly why SWVA is viewed as it is by the rest of the country. SAD.
Comment by WOW — September 30, 2008 @ 10:29 am
The awful smell is Pelosi's Epic Fail in bringing the Democrats to heel. I know why the Republicans voted against the President's wishes. Why were the Democrats voting against the Speaker's wishes?
Comment by Henry — September 30, 2008 @ 10:32 am
From what I see, Speaker Pelosi delivered the number of votes she and Boehner agreed to and then Boehner - who said he had 100 votes - only came up with ???
His argument was: She wasn't respecting their feelings?
Again - the bill came from the Republican White House and he and the new standard bearer couldn't rally their party to deliver.
Run Away! Run Away!
Comment by Concerned for the Future — September 30, 2008 @ 11:30 am
Pelosi got up and ripped the Repubs right before the vote!?!? Claiming how it was all their fault, that and the millions of letters and phone calls to state senators and congressmen from citizens threatening to oust them from their chairs if they vote for it is what brought this pitiful bailout down. Thank you Goodlatte, thank you Pelosi (LOL), and thanks to all citizens who actually keep up with finances.
Comment by Marked Man — September 30, 2008 @ 12:30 pm
Marked,
This bill was negotiated by Bush and Your parties leaders.
Congress is the only place this bill could have gotten passed.
Dem's had enough votes if all voted along party lines.
Your party failed.Period.
As for me I am still sitting pretty good. I could careless about this bailout. I dont want it, I dont need it.
Comment by HERB KREBS — September 30, 2008 @ 12:39 pm
Wake up Herb... Which party is Pelosi affiliated with? Why was she in favor of it then?? MY party? nah i dont want her, dont need her. This mess was created not by Dems and not by Reps. Point is, Bush and Pelosi and Barney Frank wanted this and they are wrong. Stop trying to turn everything into a party affiliation issue Herb.
Comment by Marked Man — September 30, 2008 @ 1:14 pm
Marked,
The comment was meant for Concerned for the
future. I am with you.
that was my typo.
Comment by HERB KREBS — September 30, 2008 @ 2:12 pm
Concerned,
Actually my intent was not to blame Pelosi. It was to demonstrate a point to you, but apparently it zoomed right over your head. It must be tough to see with those partisan blinders on.
The point was, your assertion is an excellent demonstration of the logical fallacy, post hoc, ergo propter hoc.
If you insist that the decline in the stock market is due to Bush's presidency, then you must be equally open to the assertion that the present problems are the result of the Pelosi-led Congressional democrats. For the same argument and facts support each assertion.
Comment by C Ramsey — September 30, 2008 @ 7:55 pm
Josh,
Ayer's was never convicted of a damn thing and is a respected member of society. I remember the days when the students were uprising all over the country. It's called civil disobedience, and it got the attention of the powers that were. We marched right here in Blacksburg, and on the Tech campus. Remember Williams Hall? Vietnam was the war back then. Another "police action" that should never have happened. Obama was eight years old when this was going on. Maybe if you had attended a few funerals of your friends, your eyes might be open a little wider.
OJ is correct about all of the comparisons of the news outlets. We have had this discussion in the past. I could care less which news show ranks where, but compared to the big three, FOX has a long way to go. But go ahead and believe the garbage that you hear. After all, I wouldn't expect anything more from someone that still supports Bush and thinks Rusho is a legitimate source of news.
As far as any investigations go, I don't care which person or party is guilty. If criminal conduct is discovered, throw the book at them.
Comment by Blue John — October 6, 2008 @ 9:43 am
Dave, please post exactly what Bush did to put the country in a bad shape then post what the Democratic controlled congress did to put the country in a good shape. Then please tell us what Bush did by himself that was NOT approved by Congress that really hurt the country.
Im having a hard time following your line of thinking there.
Comment by Marked Man — October 6, 2008 @ 9:49 am
"Ayer’s was never convicted of a damn thing and is a respected member of society."
LOL. Right. Ayers ADMITTED the bombings. In fact he has said he's sorry he didn't do more. The reason he wasn't convicted was prosecutors overstepped their legal bounds, NOT because the case was without merit.
Only among leftwing radicals would Ayers be respected. To the mainstream, he is a wretched disgrace. For Obama to have served several years son a board with this man, knowing of his admission in bombing federal buildings is unconscionable. Obama knows it, too. That's why his campaign reacts so strongly to the Ayers connection.
Comment by Josh — October 6, 2008 @ 11:43 am
Josh:
How are you on people losing their life savings because an S&L owner paid his friends to influence regulators?
Comment by Concerned for the Future — October 6, 2008 @ 1:04 pm
Josh:
I dare you...
http://www.dailykos.com/storyonly/2008/10/6/122031/146/790/621616
Comment by Concerned for the Future — October 6, 2008 @ 1:06 pm