Pass the bailout now
Today's column:
Congress will pass a bailout package. The stock and credit markets are making sure of that.Sure, congressmen are loath to tell constituents right before the election that they spent taxpayer money rescuing prodigal fat cats. But they'll be even less eager to explain why they triggered what might be a titanic stock collapse, a lending Ice Age and the worst economic downturn since the Depression. If they need markets as political cover to placate voters who don't seem to get how much danger we're in, so be it. But bet on a package being passed later this week, a temporary recovery in stocks and then a long, painful recovery punctuated by more crises.
People in the Clinton administration used to complain about the "vigilante bond market" that punished policymakers with breathtaking plunges if it didn't get its way. But those troubles were a croquet match compared with what will happen if Washington doesn't move now.
Yesterday's 778-point tantrum by the Dow Jones Industrial Average was a mere preview. And stocks aren't where the main action is. If you want to be truly unnerved, talk to somebody who knows what's going on in the credit markets.
Read the whole thing here.
Highly recommended: David Brooks in today's NYT.
In 1933, Franklin Roosevelt inherited an economic crisis. He understood that his first job was to restore confidence, to give people a sense that somebody was in charge, that something was going to be done.This generation of political leaders is confronting a similar situation, and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. Instead, by rejecting the rescue package on Monday, they have made the psychological climate much worse...
And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.
Comments
I don't know how David Brooks (and so many others) can heap praise on one of the great monsters of American history, Franklin Roosevelt - a man responsible for destroying so many innocent lives.
Posted by: kdogg36 | September 30, 2008 11:47 AM
I don't know that I agree with you. The recession started a year ago according to my wallet. People were losing their jobs then, and will continue to lose their jobs in the foreseeable future. Banks made loads of loans to individuals who never should have been given loans. Because of this I am expected to pay some of my very small income by anyone's standards to the Government in order to help the banks out. When was the last time your bank waived an overdraft? When was the last time the bank did anything for you because you were down and out and cash strapped? I now see my meger 401K trashed. When I get to be 70 and half will the banks be nice to me because I gave them money when they pursued practices that caused the mess that they are in today? Will they say to me hey! your 401K investment isn't enough for one year much less than 10+ years? No, instead they will charge me fees for taking my money out and for any transfers to other institutional investments I decide on. The market is correcting and it is better for it to do it now, and yes WE ALL will bleed from this correction. Maybe someone with courage and intelligence will come in, institute some regulations in place so this doesn't happen again. But, don't bet the house or the 401K on it. Also as a person who did work the front lines when a local major bank went down the tubes, I have a very different perspective. Someone does buy up the assets, some stay in MD some go elsewhere. Nothing lasts forever except for the taxes that I will no doubt pay on this fiasco.
Posted by: patty | September 30, 2008 12:59 PM
I am wondering that rather than buying Mortgage back securities from the troubled financial institutions, why aren't we thinking about using the pool of money ($700Billion) to pick up foreclosed properties from the market. Once the inventory of foreclosed home reduce, demand might pick up, stabilizing the house prices. Once the prices stabilize, start selling the foreclosed houses. In the meantime, short term (month to month or three months) rental leases can be written at discounted prices. Perhaps the homeowners who are going to lose their house might use the reduced rents to stay in the home through the winter... Am I missing something?
Posted by: Surinder Puri | September 30, 2008 2:01 PM
David Brooks? Isn't he the guy who was trying to sell some idea that there's a benevolent ruling class recently?
I don't buy that, and I don't buy this.
Posted by: Cheap Jim | October 1, 2008 1:39 PM