Saturday, October 4

Politics: Art of the Passable

The Bailout Bill is proof that there is nothing that happens in Washington that doesn't require lubrication and holding of the nose. This bill, now with $110-150 billion more dollars attached to it, although without the golden parachute for CEO's, places the doling out of our taxes to the very foxes that invaded the hen house. Henry Paulson and his brothers and sisters at Goldman Sachs, JP Morgan, and other such financial capital firms; many of whom will no doubt capitalize on their prior misjudgments (one must replace one's Golden Parachute some how, mustn't one?). Where I come from that is the very definition of crazy--to repeat what has been done before and expecting a different result.

Congress claims that after it failed to pass the bill without the "sweeteners" that their offices were inundated by calls from small business people (e.g., car dealers) who claimed that without the credit crunch being fixed, they would be out of business in a matter of weeks. "Our membership is telling us that there’s either no credit available or it’s so tight it’s not available,” said Bruce Josten, the chief lobbyist for the U.S. Chamber of Commerce. Todd Stottlemyer, president of the National Federation of Independent Business, said the Wall Street bailout was a “bitter pill” for small businesses to swallow, but they know their health and the health of their vendors and suppliers depend on credit being available.

However, if the point is that "easy credit" is one of the things that helped the economy to arrive at this rocky place, shouldn't the legislation address this instead of giving $200,000 to a toy wooden arrow company or $357 million dollars for NASCAR race tracks?

With Congress feeling good that it passed legislation that both D's and R's could live with (never mind the folks on Main Street), next week they plan to start hearings to decide who will shoulder the blame for the crisis--my guess is this will last at least until inauguration day.

In the mean time a board will be formed by the Secretary of the Treasury. Companies that sell mortgages and mortgage-back securities to the government will be required to provide warrants to the government so taxpayers will benefit if the companies’ earnings improve. With limited oversight they will decide whose bad debts the government will buy back and what they're worth. One blogger has an idea of how the bailout will go).

In this respect us Main Street people can relate; it's like pawning your gold wedding ring and getting $100 dollars for it because that's what the pawn shop was willing to give you (The difference here is that your wedding ring has a real value--whatever the market value of gold happens to be--mortgage values are less certain).

Given the experience for taxpayers after the Savings and Loan bailout in the 80's, it will be hard to believe Senators like Judd Gregg, a New Hampshire Republican, who said he thinks taxpayers will come out as winners. “I don’t think we’re going to lose money, myself. We may, it’s possible, but I doubt it in the long run.” In the long run we all end up dead.

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