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Bailout Still in Trouble
As my Hill friend said yesterday, the bailout seems to be in more trouble than some earlier reports indicated. My two cent summary of his take, which is worth reading, was that there is a seriously underestimated gap between the White House and Congressional leadership on one side, and the Congressional rank and file on the other; and that the media reports suggesting a deal was imminent by and large were being informed by the former, who are more committed to a quick deal; while the Congressional rank and file is more informed by being overwhelmed with thousands of calls from screaming constituents who are truly outraged over the prospect of a bailout of Wall Street fat cats. Vulnerable incumbents may not feel they can vote for anything resembling a bailout until after the election.
Here's his latest:
My take is that the politics are way more scrambled than anyone can get a handle on. Basically, Bush and the congressional Democratic leaders have a straightforward objective and agenda - getting a modified Paulson plan cobbled together and then, via consensus, passed and made law. Apart from that, though, there are many actors with many different objectives - both policy-wise and purely politically - and these cannot be arrayed along any single dimension, or even in any easy way at all. There are just many cross-cutting objectives, forces and circumstances, so the whole situation is probably too complex to strategize about, apart from the first group who have a strategy for achieving their objective. I don't think McCain has a clear sense of what his strategy is, and he is not trying to manipulate the situation - or not successfully - because he does not have any mastery of it (not because he doesn't want to). (Probably worth adding in that it is doubtful McCain has any policy convictions at all on this set of issues, at least in this context, since his historical positions are simply unacceptable in the current debate.).
Let me add that yet another peculiarity of the situation is that while, on the one hand, the House Republicans' alternative plan is laughable as a matter of policy - just laughable - they are alone in tapping into the widespread rage out there at the very idea of a gigantic bailout for Wall Street malefactors. Many House Democrats are feeling the same, but they have no representation at the table. So the House Republicans are, in some funny sense, sitting pretty politically.
And finally, watching the coverage remains quite weird, because there is this enduring assumption that a deal is going to be done, that it will be, fundamentally, Paulson's plan with modifications, and that that is the right thing. That may partly reflect the fact that everyone realizes we are at a dangerous moment. But I can't help but think it also reflects the fact that by and large the class of people in and driving the press coverage is completely disconnected from the perspective of people who are overwhelming, in a completely uncoordinated way, virtually every congressional office.
So it is a very very weird moment.
Democrats.
The Party of the People.
Indeed....
It is odd how the Democratic leadership (Senate especially) has committed itself totally to making the Paulson Plan workable.
I think Dodd and Franks and Reid et al should take a step back from the deal. I know why they were upset today...they have been working in good faith and got sandbagged.
But it is Bush's economic F-up, why the heck are they so determined to hurry a plan through? The whole thing is a poison pill imho.
Its been a week now and the world hasn't ended. Why can't it all wait another week or two or three?
The Democratic leadership in alignment with George Bush and Hank Paulson are working over-time to transfer middle class Americans hard earned money to Wall Street fat cats who earned billions of dollars of bonuses based on phony profits.
People are catching on. They are outraged and informing their senators and congressmen. If the plan worked out by Paulson and the Democratic leadership is passed all those that voted will lose votes on Nov 4th as they will be shown to be tools of Wall Street piranhas that have taken us into this mess.
Everyone knows that Paulson was the CEO of Goldman Sachs from 1998 to 2006. It was precisely during this period that firms like Goldman Sachs led the creation of the credit bubble. Paulson himself is reportedly to have made $700 million. No one is calling for an investigation to determine if CEOs like Paulson committed fraud and deception on public investors and if their ill-gotten gains should be clawed back. Instead the very people responsible for this financial debacle like Hank Paulson are being entrusted with this "bailout" which is essentially a transfer of wealth from middle class Americans to these wealthy elites.
Hank Paulson should be fired immediately and investigated for fraud and malfeasance.
malabar I agree with you entirely. I'm afraid if the Democrats go along with this plan they will have blown it entirely. McCain will easily take the White House, and the Repubs will regain a decisive majority in both houses of congress, and we will be royally screwed. This is looking like Bush's "October surprise".
At what point will even the most partisan hacks cease with "History will assess George Bush as a moumental leader" crap? Two failed wars (and the negligence that got us into them), Katrina (and the negligence that made it worse) and this financial meltdown (and the negligence that both got us into it AND made it worse). STFU with your fawning crystal balls! Bush was, is and always will be a miserable failure. Add in a few dozen other hacktastic episodes (torture, Justice Dept firings, global warming science shenanigans, denying the sick stem cell advancements) and gallows will only suffice as punishment. Lesser offenses have merited such a fate.
I am very disillusioned by the Dems on this. Obama, Pelosi, all of them, have relatively little to lose by scrapping both these plans. We've finally heard from a sizable group of academic economists. Why weren't these people called in earlier? (Way earlier.) More evidence that this country is frighteningly anti-intellectual and anti-science, and that these biases are not just limited to the blue collar public. This particular area should be a Dem stronghold, as party constituents do tend to be more educated, more in favor of true research, etc.
I would strongly support another plan in which more educated, unbiased minds are central. If the markets fail in the meantime, we can then say honestly that we've done the best we could to prevent it. It is, after all, a largely Republican failure.
I received this letter this morning. I deleted the name/company of the person who sent it.
My name is xxx, I am a Financial Advisor at xxx Financial Services. As you know, it is very difficult being the only democrat in my office.
I am extremely disappointed in our federal government in how they have politicized the current financial situation.
I have only been in the industry for 4 years and as you can imagine that it has been very trying. Our cash alternatives are illiquid, AAA securities are worthless, the largest and oldest banks in the world have disappeared, merged, or been taken over.
I find myself on conference calls everyday trying to find the safest money market funds and defending the use of municipal bonds. This is not a very efficient us of time or resources.
I am pleading to you all to make a statement regarding the separation of politics and finance. This not a presidential issue, this is an issue that has attached itself to the success or failure of our markets.
I also desperately ask for us all to begin to teach the younger generation how to voice their opinion in Washington. As a group we should begin to protest the failures of an administration that that still finds time to smile while my next-door neighbor loses their house.
We need to begin to organize a coalition to pressure the politicians in caring more about the citizens of this country and less about their political agendas.
If you need somebody to help start this, consider my hand raised.
My wife and I, with our three kids are struggling, and we only have hope left.
The only quibble I have with the analysis is the notion that the Republican opposition is principled. I rather doubt it; I think they want a bill to pass, just without their signatures. That way, they can run against the bailout, but don't have to defend the market crash that might occur if the bailout doesn't pass.
I am astounded by the recent notion that we must bailout failed Wall Street companies. No one was there to bail me out when the economy forced me to close my shop and declare bankruptcy and lose my home! Instead of giving money to the rich (once again) why not consider putting it into the hands of Americans?
(Remember mil=6 zeros, bil=9 zeros, tril=12 zeros) With 200 million taxpayers, giving them $5,000 each would cost one trillion. Yet the government would receive over $250 mil back in taxes and it would pump nearly $750 mil into a failing economy. This would help those behind in mortgage payments (and therefore their respective banks), help the auto companies (down 12%) and with the holidays coming, help the retailers. Think of the people who could finally go to the doctor with that problem they've been putting off. Or that student that needed help to just get ahead one semester. Or the poorest who haven't had enough food or gas for ages. Yes a trillion is an expensive proposition but we just gave that much to Georgia as a foreign assist without so much as a blink. Congress needs to focus on Americans - please.
Wall Street (and their enablers in both parties) want the taxpayers to shoulder the entire cost. Heavens forbid if Wall Street itself has to shoulder any of the burden. I suggest that the framing or focus on a broad based taxpayer funded bailout is entirely wrong. Since Wall Street created this problem they should tax themselves to pay for the suppossed $700 billion dollar solution that they and the politicians claim will solve it.
It looks like normal volume at the Dow is about 4 billion daily transactions. Slap a measley one dollar surcharge on every one of those transactions, and we're talking $4 Billion a day raised, and that's not including the NASDAQ and other markets (the Chicago exchanges, etc.). Over the course of the year, that would easily approach $900 billion. Hmmm.
Larry
There are only a few books that I've read four times cover to cover. One of those books was written in the 19th century: "Extraordinary Popular Delusions and the Madness of Crowds."
If you every get a hold of a copy, read the chapter about Tulip Mania.
I'm sure if the author were alive today, he would have a two word diagnosis for what's happening to Wall Street now: "Delusional optimism."
They bet, they lost, and now they want US to clean up their mess. It's Reality Check time!
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