So Congress has voted down the bail out. Obama's response. "I'm sure they will do the right thing."
The Republican's are blaming Nancy Pelosi and her last minute "partisan" speech. I really want to see if I can download her speech on the Floor today. The Guardian published some quotes from her speech. Nothing unusual.
But the real story is that the Republicans didn't want to support it despite Bush's up-to-the-minute appeals. The Democrats needs the Republicans' support to pass it. So . . . whose fault is it really?
So what's the damage?
Here is a visual picture from Smartmoney's Map of the Market at around 1 pm Pacifif Time on Sept 29, 2008. As you can guess, red means down.
Crude oil dropped $10 a barrel, to around $96, the biggest fall in 7 years. The US dollar strengthened, further eroding commodities values. And now Europe is feeling the pinch with the nationalization in the UK of Bradford & Bingley Plc and Netherlands and Luxembourg extended an $16.3 bil bailout to Fortis, the largest Belgian financial-services firm.
Buckle your seat belts. We are in for a wild and humbling ride!
Monday, September 29, 2008
No Bail Out- yet
Posted by USWest at 12:55 PM
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12 comments:
How can it matter what Pelosi said? I just don't get it. The Democratic speaker was mean to me, so I didn't vote for President Bush's bailout bill. Who do they think is behind this bill anyway? Sorry that someone reminds them that it is necessary to clean up the mess created by 8 years of GOP rule in the white house, 12 of 14 years of GOP rule in the Congress, and 25 years of laissez-faire silliness on Wall Street.
This is just a dumb, dumb excuse. They wanted to renege on their agreement to produce a vote of the majority of Republicans.
Dow Jones Industrial Average posted a drop of 777 points, the biggest point-drop in history. It did not rally toward the closing bell. I hope tomorrow is better! I hope the gloom-and-doom prognostications are all wrong, and the market will right itself. But I hate the risk.
The Dow fell precipitously right before the closing bell. DJIA, NASDAQ, and S&P are all down 7-9% in a single day. Yikes.
I notice Brad Sherman voted against the bill. I did not expect that.
It's political cover. When the Dow drops another 1000, more GOP congressmen think will be able to say credibly that they "had to do something."
Dr. S - Brad Sherman has been a vocal critic of the bailout plan for a week. I listen to KPCC during the week and he was on Larry Mantle and Patt Morrison several times to describe what was going on in Congress and to rail against the bailout bill as an unprecedented transfer of power.
I knew Sherman was a vocal critic of the plan, but I thought he was trying to improve it rather than kill it.
I still owe a comment to RbR; since the original post got pushed down so much, I'll answer here.
I earlier expressed my hope that the bailout would not come, and RbR asked for a counterproposal. Here it is:
1. In the long run: adjust regulation
2. In the short run: do nothing
I think 1 doesn't really need much explanation. So let's go to 2 right away. A bailout obviously costs the tax payers some money (at least in expectation; there is a chance to win). It further will distort the pricing process since the government plans to pay inflated prices. It won't really add liquidity to the market, though. This is because the government doesn't have the money lying around. It will have to issue some debt itself. So the intervention will suck up liquidity at one point and pour it in the market at another point - the net effect is zero.
To summarize, there is a huge, obvious cost associated with the bailout; the benefits are debatable at best. Thus, my recipe is to wait until the banks sort this thing out among themselves.
So which Democrats are out of step with their leadership on this? Why should what the House Republicans want matter at all unless there were unity problems among the Democrats?
Since Dems have the majority why not restructure the bailout in such a way that it appeals to the holdout Democrats and then force the thing through? Sure it would leave bitter, partisan feelings but it would get it passed.
What sorts of protections should be offered to homeowners?
I'm not sure if this website will work in the US, but if it does you may be interested in this interview on Australian ABC Radio.
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