Wall Street Bailout or Wall Street Wipeout?
September 29th 2008 23:09
What happens when politicians can’t get their act together in time to put a bandaid on a potentially fatal systemic economic wound? That is the question we are faced with this morning, as members of the US House of Representatives failed to pass the $700 billion bailout package overnight. The situation is quite dire. Both people in the industry and your average punters were all expecting the Congress to pass the bailout package to stabilise the situation and restore investor confidence, at least while they figure out what measures they need to put in place to stop this happening again. But alas, that wasn’t to be and now the members of Congress are heading home to their electorates for a few days, not back on Capitol Hill until Thursday. It‘s not exactly the perfect time for the nations lawmakers to go on a break. In this instance the old saying is painfully true: time IS money. Any members with a brain in their skull would be using this time off to stay on the Hill and try to get a deal together that is ready to vote on first thing Thursday morning. But the likelihood they will be able to get a deal off the ground with members of Congress all heading home is pretty unlikely. Which puts us in a very difficult position: Congress is incommunicado until Thursday and it’ll probably be another week after that until there can be any sort of deal to speak of. Wall Street must be pulling its hair out.
That is the danger in a system like the American one where politicians don’t generally tow the party line. All the leaders of both major parties have agreed to the bailout plan. The Administration has agreed to it. But it didn’t past the first hurdle. With a plan this big, there are some concerns about the size of government and using tax payer money to bailout corporation that have gotten into the situation they are in through mismanagement and risky business ventures. Some members of Congress think that it’s the role of the market to adjust itself after a few tosses and turns and convulsions like we are seeing today. Let them stew until it’s over and eventually business will clean itself out and come back bigger and stronger than ever, having learned an important lesson. That is the free market view of things. Other Congressmen that have a view of government that is more conducive to big Federal bailouts don’t agree with the conditions placed on the money, or the lack thereof in some cases. Opposition to the bailout comes from both sides along ideological lines, but it also comes from a somewhat more nefarious front.
Despite the statements of the Republican and Democratic leadership indicating that they both support the bill and encourage their members to vote for it, the fact of the matter is that since their election in 2006 the Democratic Congress has been woefully unsuccessful. They were elected with a lot of expectations to deal with Administration policies that had begun to turn-off a lot of members of the general public. When they got there, however, all their promises amounted to nothing. The Democratic Congress found that it was relatively unequipped to shutdown the actions of the Bush Administration without severe repercussions and political blowback that made them look incredibly bad. They were elected to stop bad policy but, in their fear not to appear to be vindictive, they have been unable to do much. Until now. The bailout is the biggest economic intervention the Bush Administration has made. George Bush said it himself: his first instinct was to leave it to the market because hell, he’s a free market kind of guy at heart. It was going against his better nature to do this in the first place. But now that it’s done it poses an opportunity for some partisans. Sure, some oppose the bill on ideological lines. But there are undoubtedly some that see this as an opportunity for the Democratic Congress to finally get a win. It’s simple. Stop the bill, make a big noise and then set it up so the Democrats can rush in to save the day. If that is the case, however, it’s a risky and downright destructive move for a few cheap points. We can only hope that that’s not what is going on. If it is, the Democrats are playing with fire. In the end, with the Dow dropping another 770 points overnight, there isn’t time to waste on getting this agreement put together.
Otherwise the holidaying members of Congress might not have homes in their districts to go back to next time.
That is the danger in a system like the American one where politicians don’t generally tow the party line. All the leaders of both major parties have agreed to the bailout plan. The Administration has agreed to it. But it didn’t past the first hurdle. With a plan this big, there are some concerns about the size of government and using tax payer money to bailout corporation that have gotten into the situation they are in through mismanagement and risky business ventures. Some members of Congress think that it’s the role of the market to adjust itself after a few tosses and turns and convulsions like we are seeing today. Let them stew until it’s over and eventually business will clean itself out and come back bigger and stronger than ever, having learned an important lesson. That is the free market view of things. Other Congressmen that have a view of government that is more conducive to big Federal bailouts don’t agree with the conditions placed on the money, or the lack thereof in some cases. Opposition to the bailout comes from both sides along ideological lines, but it also comes from a somewhat more nefarious front.
Despite the statements of the Republican and Democratic leadership indicating that they both support the bill and encourage their members to vote for it, the fact of the matter is that since their election in 2006 the Democratic Congress has been woefully unsuccessful. They were elected with a lot of expectations to deal with Administration policies that had begun to turn-off a lot of members of the general public. When they got there, however, all their promises amounted to nothing. The Democratic Congress found that it was relatively unequipped to shutdown the actions of the Bush Administration without severe repercussions and political blowback that made them look incredibly bad. They were elected to stop bad policy but, in their fear not to appear to be vindictive, they have been unable to do much. Until now. The bailout is the biggest economic intervention the Bush Administration has made. George Bush said it himself: his first instinct was to leave it to the market because hell, he’s a free market kind of guy at heart. It was going against his better nature to do this in the first place. But now that it’s done it poses an opportunity for some partisans. Sure, some oppose the bill on ideological lines. But there are undoubtedly some that see this as an opportunity for the Democratic Congress to finally get a win. It’s simple. Stop the bill, make a big noise and then set it up so the Democrats can rush in to save the day. If that is the case, however, it’s a risky and downright destructive move for a few cheap points. We can only hope that that’s not what is going on. If it is, the Democrats are playing with fire. In the end, with the Dow dropping another 770 points overnight, there isn’t time to waste on getting this agreement put together.
Otherwise the holidaying members of Congress might not have homes in their districts to go back to next time.
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