The House of Representatives voted 228-205 today against the massive $700 billion economic bailout (or "buy-in" if you choose Rep. Pelosi's preferred nomenclature). Below are a few gut reactions:
(1) Hank Paulson won't get his chance to do the Scrooge McDuck backstroke in a room piled 8 feet deep with dollar bills (which, by the terms of the failed bill, he literally might have been able to pull off without congressional, judicial, administrative, executive, or any other type of oversight);
(2) The stock market fell 700 points, signifying what I've been thinking all along: these companies aren't really worth what we thought they were when that flashing number on TV kept going up and we kept buying stock based only on the flashing numbers instead, oh say, SEC filings and the like;
(3) According to minority leader John Boehner, he couldn't muster the Republican support for the bill because Nanci Pelosi hurt their feelings before the vote (if that is really true, I'm jumping off a bridge);
(4) We are still a semi-capitalist society (high five to the Invisible Hand);
(5) Giant corporations still can't borrow millions of dollars in day-to-day loans to pay for their operating costs;
(6) Giant corporations have to borrow millions of dollars in day-to-day loans to pay for their operating costs?;
(7) My power is still on, and I get cable TV and the internet, food supplies are steady, I own a shotgun, two serviceable fishing poles and a whole bunch of camping equipment, and there are no riots in the streets. All-in-all, not a bad day.
Ok, so on a more serious note, I'll explain why I don't support the $700 billion bailout (other than the 700 billion reasons I just gave, or, for my part, my $2,000 piece of it). Ever since September 12, 2001, the Bush administration has been pushing legislation down our throats via a weak, ineffectual and compliant Congress (both Republican and Democrat) in the name of perpetual crisis. September 11 was a crisis and it demanded swift action (which we never took). The Bush administration has found a great source of power in perceived crisis and has used that perception to demolish the traditional role of the executive branch in our government and the role of the government in our lives. Their latest escapade has been to push a fundamentally flawed piece of legislation down Congress' throat in the name of yet another in a long string of "crises." Bravo to the lawmakers who finally stood up (what took you so long?).
It is true that our economy is in bad shape. It is true that there are several fundamental economic problems that need to be solved and, if the markets are left alone to work themselves out, things are going to get a whole lot worse before they get better. However, what we don't need is another 11th hour bill, rushed through Congress and signed by Bush's golden pen (subject, of course, to his signing statement) that ends up becoming yet another piece of regrettable crisis legislation.
8 comments:
Giant corporations have to borrow millions of dollars in day-to-day loans to pay for their operating costs?
Yep, a combination of our crazy-ass tax and bankruptcy structures and current account deficits.
Say you're a huge conglomerate earning billions of dollars per year. Obviously, the corporation could use its earnings to finance its operating expenses, its capital expansion, etc. But why? Just borrow the funds via short term commercial paper, which incidentally is issued on a quarterly basis (Oct. 1?). Borrowing provides so many advantages, many not so noble. Let's see. Commercial paper is generally unsecured, so the bondholders are bottom men on the totem pole if the company goes belly up. Interest and rent for capital expansion (hence the explosion of "sale and lease" provisions) can be fully deducted, whereas property must be depreciated. In effect, the accumulation of the debt represents a transfer of wealth from the bondholders to shareholders of a company.
Welcome back Blue.
I agree with you that this whole situation sucks, and my gut instinct is to be against the bailout as well. However, I genuinely believe that if congress doesn't get something passed within the next week or so things might just approah an "oh shit" catastrophic level.
I don't like the idea of rewarding corporate greed any more than you do, but I like it a lot more than a complete credit freeze and runs on the banks.
Bail 'em out and regulate the hell out of 'em.
Anon: That's exactly my point. Any bailout is not going to correct systemic problems like the commercial paper situation, the tax structure, government/corporate/individual deficit spending, etc. I saw one figure that had Lehman Bros. leveraged at 70:1 when they collapsed...70:1!!! Who's bright idea was that? The amount of faith it takes to leverage yourself 70:1 rivals that of Jesus Christ.
Billy Bob: It's good to be back. I have heard vague accounts that the economic crisis is "about an inch away from reaching Main Street." (Heard that on NPR, can't remember the speaker). I think what is more realistic is that hard times are about to start hitting companies outside of the financial sector (i.e. those that depend on the commercial paper markets). I saw another interesting post over at Indigo Journal (great new site for the lefties, by the way) lamenting the fact that much of what has happened is that some corporations (AIG, was the poster's example) have become so big that we can't afford to let them go under. Wachovia is about to be subsumed by Citi, Bank of America is buying up companies like Wall Street is having a yard sale, and JP Morgan is being JP Morgan. The times they are a'changin' my friend.
Good article Blue.
One side issue that will be worth watching is the defection of House Dems. I think 40 Dems voted against the bill. Of course, we know why they defected. Voter anger. But it made Nancy look impotent especially after that adolescent speech about Repubs being the problem.
As a FORMER George Bush supporter, I have to say this: he's either a crooked, power hungry sob or the most stupid man alive. I'm sick of both parties playing politics with my future and the future of my children and grandchildren. In the words of some great...I think it was a woman: "OFF WITH THEIR HEADS!" Both of them.
Anon(2): I have often wondered whether Bush is sinister or merely incompetent myself. I don't think we'll ever really know until the Bush Papers are released (and, given the administration's penchant for redaction, who knows even then?).
You are also right to point out that both parties have been largely deficient in advancing the interests of the common man (although I don't think I would express my distaste in quite such categorical terms).
My question to you is: what is the solution? If both parties are failing us, is it time to look at a third party?
Quite possibly...I don't think either party can be fixed. The good ole boys are large and in charge. I don't think our government officials represent us at all. Perhaps it is time for: "We, the people..." IF "the people" can agree to disagree on some lesser issues and come together on the more important ones. I certainly intend to look at some alternative parties. Do you have any suggestions? By the way, Blue, I am mostly conservative but willing and open to change.
Anon2
I also have been a George Bush supporter, but as Blue pointed out, there's something wrong. I tend to believe that he's simply incompetent. Many of my Dem friends have been telling me this for years saying that he was surrounded himself with sinister people. I rejected that notion, but now, I think it might have been correct.
George will go down in my book as having been as bad as Jimmy Carter.
No, Blue, that will not make me a Bush Democrat.j/k
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