The US House of Representatives rejected the Wall Street bailout proposal 228-205 this afternoon. The Democratic leaders in the House--who had compromised to the hilt to gain bipartisan support for a bill they personally detested--were stunned when less than a third of the Republicans ultimately voted for it. The Democrats clearly put country first, while the Republicans voted for political convenience.
The lesson for House Speaker Nancy Pelosi must be crystal clear: There is no point in compromising with the Republican leadership in the House. They have nothing to offer; their caucus is too disorganized (as RbR has described well). The Democrats should fashion a rescue plan that also gives strong protection to homeowners and revises the bankruptcy rules--provisions Congressman Barney Frank pushed hard to win, but ultimately sacrificed for the empty promise of Republican support.
I hate the idea of a bailout, but I hate the idea of a recession worse. If the Democrats are going to do what is right for the nation, it seems they need to forget about pleasing the fickle Republicans and instead rally their own caucus. It is time for the Democrats to go it alone. When the Republicans cannot even come together to save their own Wall Street backers, it is clear there is nothing across the aisle to reach out to.
Monday, September 29, 2008
Time to Go It Alone
Posted by Dr. Strangelove at 12:38 PM
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7 comments:
I agree with Dr.S. Pass a real homeowner bailout with Democratic support on both sides, and make the President veto it if he dares.
Both sides of the Hill, I meant.
Yes, I see no other good option.
"...gives strong protection to homeowners"
Shouldn't people who took on more house than they could afford be forced to deal with the consequences? I don't see how bailing out people that took on irresponsibly large mortgages is going to help anything.
In my gut, I agree with you, Bert. Homeowners should be forced to face the consequences of their bad investments, just as bankers who traded in risky mortgage-backed securities should be forced to deal with the consequences.
But sometimes we have to bail them out anyway, and this is one of those times. (The reason we need a bailout is, as I understand it, basically the money multiplier effect: one dollar lost in the financial markets means many dollars lost to the economy as a whole.)
So we can give value to the "toxic" mortgage-backed securities in two ways. We can buy up some of the securities, thus rebuilding the market for them, as Paulson suggests. But since the underlying reason these securities have little value is that certain folks are expected to default on their mortgages, we could also give value to these securities by helping those people pay their mortgages.
There is a fairness issue here. If there must be a bailout--and I think there must--then we should help both borrowers and lenders to deal with the consequences.
OK. Assuming a bailout must happen I guess I'd like to see something that, in addition to bailing out those on the edge, rewards people who have responsibly managed their mortgages. That or perhaps something that still punishes those who were irresponsible while offering them a way out (like some sort of bankruptcy offering).
In a sentence: There needs to be plenty of stick applied to balance out the carrot.
Bert said "Assuming a bailout must happen I guess I'd like to see something that, in addition to bailing out those on the edge, rewards people who have responsibly managed their mortgages." And responsibly managing your mortgage may include not taking one out in the first place, ad we get back to Bert's first argument.
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