And that isn’t snarky. I think the majority of House Republicans and a good third of House Democrats—not, incidentally, including my representative—did the right thing in defeating a pretty bad bailout bill.
The Paulson bill was an insult, but this one turned out to be worse: all the main fetures of Paulson, just sugar-coated in toothless provisions. Bloggers who listened in on the conference call got the straight scoop that even most House members didn’t:
- The three stages of bailout were a “mere formality.” The Treasury would have had the whole $700B on day 1 should they have wanted it.
- The executive compensation provision was a joke. There was pretty much zero chance of it ever taking effect on anybody.
- The whole plan was supposed to be “user friendly” to the banks, that is, encouraging them to let taxpayers pay good money for worthless assets. If we need to seduce the banks into being rescued, is it really a crisis?
- The oversight was pretty much just paperwork. It was still a one-man show.
- There was no clear idea of whether what the taxpayers got in terms of warrants would be ever worth anything.
We’ve taken a huge hit: another trillion dollars of fake money has disappeared (this time from the stock market). We’re no closer to unwinding the $60 trillion of check kiting in the CDS market than we were yesterday, and it’s pretty clear nothing substantive will happen until the end of the week.
As painful as this is, we now have means, motive, and opportunity to come up with a financial plan substantially better than Paulson. Perhaps involving the Treasury Secretary and the President is actually harmful, as few people whose jobs will be on the line on November 4 seem to want to be seen agreeing with them. The bailout is still hugely unpopular with liberals because it simply excuses the rich from their folly, and extremely unpopular with conservatives because it substitutes the taxpayer for the natural forces of the market. There are several ways to go from here. I don’t think a Socialism for the Rich Plus Socialism for the Rest Of Us solution is going to succeed. Doing nothing is still plausible, but its risk is now manifest. I still support a smaller pot, external to the Treasury, managed by people who report to Congress, that seizes assets for the American people and kicks the executives out onto the street.