Tuesday, September 30, 2008

Thoughts on The Bailout

I have delayed commenting on the recently defeated bailout plan supported by most of the Republican and Democratic leadership. And I initially supported it as I believe that this was probably the best deal we were likely to get with a Democratic majority in the House and Senate. However, reports that began coming out yesterday are causing me to take a fresh look at the entire bailout and also the votes of the Representatives- both Democrat and Republican- that defeated it.

Firstly, I am disgusted with Nancy Pelosi's 'leadership' on this bill. According to quotes from House Majority Whip Jim Clymer, as reported by Power Line,
As of yesterday, the Democrats' House whip, Jim Clyburn said that he hadn't even begun "whipping" Democratic representatives, and wouldn't do so unless and until he got orders from Nancy Pelosi. Today, Democratic Congressman Peter DeFazio told NPR that he never was "whipped" on the bill. So Pelosi evidently left Democrats to vote their consciences--which is to say, vote against the bill if they thought it was politically necessary--while counting on Republicans to put the bill over the top.

So in other words, Pelosi counted on Republicans to vote for this bill despite their constituents' feelings running heavily against it. All the while allowing her own Democrats- and let us remember that Pelosi did not need any Republican votes to pass this since Democrats control the House- to cast politically safe votes. This is not leadership- this is partisan politics at its worst.

Then before the vote occurred, Pelosi proceeded to launch a highly partisan attack on the Republicans we have seen in some time, falsely accusing President Bush and the Republicans of creating this crisis. Pelosi said,
$700 billion. A staggering number, but only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness when Pres. Bush took office, he inherited Pres. Clinton’s surpluses - four years in a row budget surpluses on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned it around. And now 8 years later, the foundation of that fiscal irresponsibility, combined with an “anything goes” economic policy, has taken us to where we are today.

This is completely untrue- it was in fact Democrats who caused the structural imbalances that led to the meltdown- particularly in regards to Fannie Mae and Freddie Mac- government-sponsored enterprises that were allowed to do borderline-legal deals and extend loans to people who never should have been eligible. In addition, the senior executives of both Freddie Mac and Fannie Mae, including Franklin Raines- are highly placed Democrats. Even the media once realized that there might be a problem- a Washington Post story from 2004 admits that the Bush Administration in fact was pushing for tighter reins on these entities- regulations that were defeated by the Democrats in Congress, even while the Freddie mac and Fannie Mae executives were pulling in huge bonuses. Where is the condemnation for these people as there was for Ken Lay of Enron? I see little difference between them- save for their party affiliation. Yet the Democrats and their shills in the mainstream media are doing their best to put the blame on the Republicans.

Secondly, the media got into the game by falsely portraying the actual bill itself. Let us recall that in it's first iteration, this bill contained a large sum of money for the corrupt organization ACORN. The Power Line guys described the Republican efforts as follows:
So, what did the Republicans achieve? They put strings on the availability of funds beyond $250 billion, requiring fresh Congressional action for the last $350 billion. They added a requirement that Treasury establish an insurance program which would be funded by participating companies. This may be a big deal; I'm not sure exactly how it is intended to operate or how much, in the end, it will reduce the exposure to the taxpayer. They established a bipartisan oversight committee, rather than a committee run only by the Democrats, as Dodd and Frank had proposed. They took out special interest boondoggles for unions and for ACORN, the voter fraud organization. They removed a provision that would have allowed bankruptcy judges to arbitrarily reduce mortgages, an ill-conceived measure that would have aggravated a central cause of the current crisis, the difficulty of evaluating mortgage-backed securities. And they mandated a GAO study on the impact of the mark-to-market accounting rule, implicitly encouraging regulatory agencies to revise or abandon that principle, which is a key reason why banks that have little to do with the origins of the crisis are currently threatened.

Of course, none of this was reported in the mainstream media, leaving many voters with the impression that not only were the Republicans being obstructive, but that somehow it was the Republicans- the minority party who (in the House at least) have no ability to block the majority- who were responsible for the bill's delay and subsequent defeat. In fact, 95 Democrats also voted against the bill- 40 percent of the majority. Had even half of them voted Aye, then this would have passed. Had all of them voted 'Aye', then Pelosi needed no Republican support at all. So why didn't they? Perhaps because constituent feeling was running strongly against the bill, and Pelosi wanted to put all the blame on the Republicans.

Ultimately, there are some excellent questions as to whether a No vote on this bill is a good idea or not. Since the Republicans did manage to get some good provisions into the bill, it is questionable- especially with this disgraceful Speaker- whether we can get a better bill. However, since the bill did not address the structural issues that actually caused the crisis- particularly Freddie and Fannie- then i questions whether this is any more than a political stopgap. There are good reasons on both sides for voting yay or nay. Ultimately, it will depend on what the markets do. However, I think that this episode has demonstrated yet again that government should have no role in business- why do we even HAVE GSEs like Fannie and Freddie? And this also demonstrates how little leadership our politicians really have. Now are you SURE you want the same people who created this mess in charge of your health care too?

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