Uncharted Territory
Well here we go.
The House of Representatives has rejected the so-called bailout bill. As a consequence, as of now, the country’s markets are in free fall. Here is the latest from the New York Times:House Rejects Bailout Package, 228-205; Stocks Plunge
This is a moment of great importance. I am not sure that many people truly understand what’s at stake. They see phrases like ‘bailout of Wall Street’ and viscerally react. Why, they ask, should the common folk all across America pay for a bailout of the fat cats on Wall Street? Well: who are you going to borrow from when you want to buy your next house? Or car? Or anything? Where do you think that money comes from?
The whole financial system is interconnected. The local bank on high street lends and borrows to and from the big city banks. They in turn get money, when they need it, from the so-called money markets. Companies borrow to build factories. People borrow to own a home. The whole edifice is one big complicated system. And at the center sit the banks. Let the banks go down and the entire thing goes down. So getting the banks back on their feet is the same as getting the economy back on its feet.
Simple.
Except when people don’t see that connection. And when some Republicans think that saving their precious free market ideology is more important than saving the economy. Why there were so many Democrats voting against the bill I don’t know, except many seem to have fallen prey to the populist notion that there weren’t enough draconian provisions to punish the ‘fat cat CEO’s’ who made fortunes on the funny money that they are now foisting on the public.
Frankly I don’t care about the CEO’s. They are fools. There is no way we can get the money they robbed from their shareholders, and in any case those self-same shareholders did not cry when the days were good.
That’s not the issue in my mind. What counts now is getting some stability back into the financial markets. Without that order the next few years look incredibly bleak.
This ‘bailout’ bill may not have been perfect. I read the entire thing last night and saw many flaws, but I thought all could be fixed as we go along. To reject it outright was a disaster. We have been through this scenario before. It was called the Great Depression. Why do we want it again? Are we that dumb?
So now we plunge into the dark. I imagine the bill will be re-presented later this week. Quite what can be done to get more support I don’t know. Perhaps more help for the average homeowner threatened with foreclosure. Homeowners are already a very privileged lot: they get huge tax breaks on their mortgage payments … renters don’t get anything similar. And many homeowners have made a killing by sitting on homes bought back ten or twenty years ago. They have ridden a wave of inflation, done nothing, collected their government subsidy, and now cry when their home prices dip a bit. The tragedy is that they don’t see the devastation they have wrought. They think this is simply a Wall Street problem.
Oh well. I cannot predict what will happen now any better than anyone else. The experts were basically behind some form of intervention, although not all liked this plan. Some of them thought that a simple nationalization of weak banks was better. I did too. Now that may be the only plan left!
As John Donne said: “No man is an island entire of himself …. so, therefore, ask not for whom the bell tolls. For it tolls for thee.”
Was he talking about the American economy today?
