Around the world, global leaders are huddling to determine the best steps to get out of the financial crisis. It’s bad. If the Dow doesn’t come back by December 31st, this year will mark its worst yearly slump since 1937. Millions of people are watching their retirement nest eggs disappear. Parents’ savings for their children’s college? Gone.
Over the last week, the market’s continued dive gave a clear vote of no confidence to the bailout plan passed by Congress and signed by President Bush. Luckily, it appears that Treasury Secretary Henry Paulson may have recognized that the plan to give away $750 billion in cash for worthless mortgage-backed securities will not solve the problem. Belatedly, he is now interested in buying equity in major banks — the plan many progressives were pushing from the beginning.
The question is: why did Congressman Frank, Speaker Pelosi, and Senator Reid let such a bad plan through? Large numbers of economists knew the original plan was a turkey. Perhaps Democrats bent to pressure from banking industry lobbyists.
This crisis could last a long time. Hopefully, the Democratic majority in the House and Senate will last a lot longer. If that is the case, members of Congress have to improve their game. They need better, more experienced, FDR-progressive economic advisers. Whoever has been advising them so far has given bad advice. If they are lobbyists, Chairman Frank should kick them out of his office. And if they are staff members, well, it’s time for new staff members. Last week’s bad plan has hit all our pocketbooks too hard for our leaders to suffer fools lightly.
the provision to allow Treasury to buy up equity in struggling financial institutions — the path that Paulson appears now to be going down — was Chris Dodd’s idea, was pushed by Barney Frank, and was opposed by Paulson.
In retrospect, wasn’t it wrong to let Lehman Brothers collapse? Wouldn’t it have been better to take them over?
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p>Some portion of credit contraction seems to be due to letting Lehman fail.
… relative to how much you’d like to help Goldman Sachs, right?… at least for Mr. Paulson, right?
We have seen too many cases of the 2006-2008 Congress being unduly deferential to Republicans.
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p>In the past, this seem to have been due to fear that the Republicans would launch attack ads based on particular votes — and in fact Republicans have launched plenty of attack ads. It hasn’t done them much good. They’re going to lose at least 10 seats in the House and at least 6 in the Senate.
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p>The bailout has its own odd political dynamics.
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p>The very best we can hope for is a moderate recession. That means that any bailout, any effort to avoid a financial meltdown will be followed by a recession. It might be a bad recession. Even passing perfect legislation might still be followed by a bad recession. And Republicans are ready to blame Democrats for it. That, I think, was why Democrats insisted that nothing would be passed without significant Republican votes.
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p>On the one hand, this means that the question was not what was best for country but what will get bipartisan support. With Bush having veto power, maybe that was never a real option anyway. Yes, there is something disgusting about this.
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p>Given the economics and the politics of the situation, what is the best we could have expected from Democrats in this situation?