As I was preparing to write this post, I ran across a letter written in to National Review Online by a ‘Western-state bank president’. It is a great summation of my feelings as well so I am just going to print it at the end here.
This is not, NOT, a ‘bailout’ of Wall St. “fat cats”. This plan is an attempt to keep what is sure to be a fairly deep recession from becoming something much worse. The stock market lost 777 points today! Some companies saw their market value decrease by 25-30%. If that situation persists, they are going to have to cut costs- which means laying people off. If small businesses cannot get credit lines, they cannot function- or if they can it will be in a diminished capacity. For all of us that have IRA’s, 401K’s, stock options, or something of the sort- today hurt badly. None of that has anything to do with Wall St. Fat Cats. It has everything to do with all of our day to day lives. I really don’t want to go through 8-10 years of a crappy, crappy economy so we can prove our free-market bona fides. This plan is far from perfect, but it is better than doing nothing. [The biggest blunder any of the responsible parties (Bush, Paulson, Bernanke, Congressional leaders) made was allowing this bill to be characterized as a ‘Wall Street bailout’- so that John Doe on Main St. could look at it as Us v. Them–and screw Them, they got themselves into this mess, I’m not going to bail them out.]
What happened in the House today is inexcusable- both on the Democrat and Republican sides. I am still looking for the leader (be it McCain, Obama, or someone in Congress) to emerge and bring people together to get SOME version of this bill passed- not because I like the bill, but because we need it. Here is the letter I referenced. I added the bold to what I thought was the most important part.
I can only offer the perspective of someone who manages money for a living, rather than someone who follows politics closely.
The failure of the House to pass the bill – combined with the resulting bickering – will likely lead to a substantial market sell-off. We’re seeing part of that occur right now, but we may well see much worse over the coming days as the inevitable sell-off hits overseas markets, followed up by another collapse at home as forced selling really kicks in and many institutional investors are required to liquidate their leveraged positions. While it would be nice if all this was confined to a few select Wall Street bad apples, the reality is ordinary people will be hurt very badly as their investments deteriorate and the economic environment turns even more negative. Unemployment will likely spike sharply from here, and the lack of available credit will impair many small businesses that rely on credit lines to finance their operations.
How any of this could possibly be construed as a positive for either McCain or the Republican Party is beyond me (and I say this as a life-long Republican)? In fact, it would seem much more likely to me that the House Republicans just handed the election to Obama on a silver platter. Blaming the vote on Pelosi’s antagonistic remarks seems especially dumb, and I expect to see Barney Frank-type comments all over the MSM tonight and throughout the week.
No doubt this was a lousy bill – everyone agrees on that. But the consequences of not passing it, or something like it, are going to be far reaching. Clinging to the “small government” mantra as things collapse around us will probably not resonate well with most voters in November.
EDIT- Let me state that the revised bill that was voted on today was far better than the original Democrat bill, and McCain deserves some credit for that. Unfortunately this bill did not pass, and the consequence may be that Pelosi and crew go back to their original bill and pass it along party lines. The items taken out of that bill included several Democrat pet projects, but to me the most dangerous is a revision of bankruptcy laws that would allow a judge to arbitrarily change the terms of a loan during a bankruptcy proceeding. There have been estimates that if lenders had to account for that new risk to their repayment that borrowing costs may go up as much as 2% overnight.