Tuesday, September 30, 2008

Makin' Bail

If this were a carnival, no one would pay to see the show. Since it is the economy and the election, we can't stop looking. I still don't know how to react to all that has gone on in the past week, but I was driving around today and listening to Limbaugh on one station and Robinette on another, and I came up with these thoughts:

- The boy who cried wolf: Whatever ends up happening, George W. Bush's legacy is in the potty. After the WMD, the Katrina response, Enron, Harriet Miers, Alberto Gonzoles, wiretapping and now - telling us for months the economy was fine, then doing a 180 and telling us that the sky is falling in the last week if Wall Street didn't get $700 billion USD no strings attached? No wonder the American people responded so negatively to "the plan." The White House should have been more concerned with a "credibility freeze" than a "credit freeze."

- The Vast Pelosi Conspiracy: This is what Limbaugh has been chirping about all day. The Democrats set this whole thing up to make Republicans look bad and win the elections in the fall. They want "as much economic chaos as possible" and have been able to manufacture a crisis within the last two weeks. Let us ignore the fact that the $700B USD "plan" was loathed by the American people on the face of things, and inconcievably put the Democratic leadership in the House, the Senate and the current Democratic candidate for President on the same "fundamental understanding" page as the current incumbent, credibility challenged Republican President who's legacy is going down the sewer. Let us also ignore the fact that these Democrats couldn't set up a game of chess if more than three of them were involved, much less set up something like this.

- The Word on Esplanade Avenue: May not be Main Street, USA, but it is close enough. The Republicans I have talked to have been of two minds when it comes to "the plan." The majority: F Wall Street in the A. The minority: write the check with no strings attached. Yesterday and this morning, every Repbulican and conservative I spoke to was cheering the failure of the bill right up until I asked them how their portfolios or retirement was doing today. Then they started yelling about Democrats from 1994, as if the current year is 1995. The Democrats and Liberals I spoke with were wondering how they ended up on the same side of this thing with George W. Bush and against the House Republicans.

- House of Cards: Garland Robinette was discussing the competency of our House leadership today. Why would they have called a vote if they didn't know who was voting for or against it? This one is easy - under pressure to find a solution that would unfreeze credit markets before the market opened on Monday, the leadership had announced that a deal had been reached. The party whips probably had some preliminary numbers suggesting that members in mostly safe seats would vote for this stinker of a plan and members in hot seats would vote against. This would give the bill enough votes to pass but keep the political hopes of incumbents in hotly contested elections alive. But every prosecutor facing multiple defendants knows that the case gets made quickly by playing defendants against one another. Every "Nay" vote that came across caused a panic in the late voters, and Reps. started to re-think how secure their seat really was. By the end, the hemmorage of votes (and I'm sure the Democrats expected more of their caucus to vote for it as well) ended up with the bill failing by only 12 votes overall. That this stinky poo-sandwich of a bill only failed by 12 votes is a testament to both Parties' leaders spanking their membership into line. In the end, the score does not correctly reflect the game.

- Fallout: $1.2 Trillion USD of wealth vanished yesterday. Vaporized, as one financial analyst on CNN was saying. To revert to an earlier theme, such wealth obviously didn't have a whole lot of reality backing it up, another place where a "credibility freeze" is hurting us. Luckily, if said wealth was able to be vaporized without the aid of atomic weapons destroying really real assets, we have the chance to imagine ourselves up another $1.2 Trillion USD in relatively short order. I'm sure Wall Street is working on how to do that right. now.



alli said...

"Why would they have called a vote if they didn't know who was voting for or against it?"

Uh, because the Republicans wanted to punk the Democrats. This is Lucy with the football. They wanted the bill to pass but they didn't actually want to vote for the thing, and now that the bill didn't pass, they're kinda screwed.

If it had passed, every challenger to every Democrat who voted for the plan would be throwing said Dems an anvil and campaigning against the incredibly unpopular bailout.

Now the Dems have a great opportunity to be leaders - screw the Republicans, write a real piece of progressive legislation (which is the only thing that will fix the economy anyway), pass it on party lines, and run against conservatism itself. That right there is the winning strategy. Do I have any hope of it happening? No. The Dems are like the Cubs: they're at their best when they're finding new, innovative ways to lose.

Dante said...

"The Republicans I have talked to have been of two minds when it comes to "the plan." The majority: F Wall Street in the A. The minority: write the check with no strings attached."

Maybe it's your definition of "Republican" or your definition of "talk" but I believe when "the plan" was first announced, at least one of us had a view far far different from either extreme you mention. You can't exactly claim you missed the post since you did comment on it. And my portfolio is doing just fine. I'm not retiring for a few decades so my stock-heavy lineup will more than recover. Anyone who is close to retirement and still has a stock-heavy portfolio is a fool.

This victory is huge for House Republicans because it shows that they're not going to tow the line for the President even if he really sticks his neck out. If they had shown this fortitude a few years ago, they may still have a majority.

Personally, I'm glad the plan failed. I think I'd rather have a temporary economic downturn than a new precedent of bailing out businesses that make foolish decisions at taxpayer expense. I believe it was Limbaugh who noted that $700 billion was enough to give $21,000 to every first mortgage in the nation or pay off every single first mortgage with a balance of under $70K. If lenders need that kind of cash infusion to keep themselves afloat, then they very much need to fall. They'll get swallowed up by someone who makes good decisions and we can all carry on after a possible bit of downturn with competent businesses running the show. My only real concern would be the amount of foreign interest in the failed assets but that concern should be addressed directly, not be a bullet point in the pro column for a bailout.

If Congress can't get this worked out this week, then they need to let it go. That "credit freeze" (whose real extent I'm questioning) will let up a lot sooner if the entire financial community isn't waiting to know exactly what Congress is going to do.

I also don't buy into the evil Democrats mucking things up. Sure they set the ball in motion with some rather shady ideas on lending and "affordable housing" but if it was going to end this badly, you'd think at some point before now banks would be complaining. Assuming that a lending model that worked well for the middle of the curve would work when you apply it to darn near the entire curve is the root of all evil here. The tips and tails of any curve vary far too much to predict anything reliably. Sometimes it doesn't matter how high you make the interest rate. You just need to say no to the loan. Fannie Mae and Freddie Mac were partially to blame for that. Not only did they lower the bar on the paper they accepted, but they put then-current subprime paper holders in a position that they'd have to lower their own bars on what's acceptable to keep the same amount of paper flowing. But they're not the only culprits. they're just the ones that our government specifically backed.

"That this stinky poo-sandwich of a bill only failed by 12 votes is a testament to both Parties' leaders spanking their membership into line."

Uh, last I checked that bill had a pretty large chunk of Democrat detractors and Republican supporters. That's hardly what I'd call spanking membership into line.

Cousin Pat from Georgia said...

@ Alli: I would think that the Democrats are the ones who are screwed, since they - not the House Republicans - sided with the incredibly unpopular GOP President on his incredibly unpopular "plan" to use taxpayer money to get the richest and most irresponsible Americans out of hoc with banks.

I find that rather incredible, on many levels.

@ Dante: At the time, I actually did mean "Republicans who I had talked/spoken to," as in personally. But while the verbal words were far more direct (and sometimes profanity laced), your point still comes through in their words (for both options, as it were) though less extreme for lack of profanity: "I think writing a blank check to Bush to bail out banks is a little over-reactive" (the F Wall St. in the A) and that you would hate to see the US "bail out everyone and then impose restrictions" (write the check).

I reckon your blog post from a week or so ago was the ideological "bump" and "set" for the "spike" I'm currently hearing from Republicans and conservatives I know.