No Bailout Yet

23:45 Mon 29 Sep 2008. Updated: 17:40 28 Jan 2009
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Congress rejected Paulson’s Wall Street bailout bill this afternoon. It was primarily defeated by Republicans, with 133 of them voting against (as opposed to 95 Democrats). So much for the party of “progressives”—the Democrats tried extremely hard to pass this appalling giveaway, with Pelosi trying to go both ways by pushing for the bill, declaiming the removal of regulation and supervision in the financial system while simultaneously doing nothing to put them back by inserting them into the bill.

The stock market plunged seven hundred points in reaction to the bill’s failure to pass, but that’s hardly surprising. Stocks were diving last week until Paulson proposed to give Wall Street free money at taxpayer expense, and it makes sense that they’d continue now the bill is dead (at least for the moment). Being able to predict that vote would have allowed you to make a rather large amount of money.

I was rather surprised by the failure of the bill. I thought that the bankers had enough clout to push it through, and I really didn’t expect the Republicans to revolt in such a manner. I did know that they were, as a party, trying to portray the bill as a Democratic one, and hence have the advantage of vilifying their opponents as elitist devotees of Wall Street in the upcoming campaigns, but even so, I thought it would pass. I thought most Democrats would hide behind the “it’s a crisis, we had to do something” story to get away with voting for it, and most did, but more than a third of them rebelled, which is something.

The argument being made now is that even if the bill was flawed, something would have been better than nothing. I don’t agree with that, and I don’t agree with this idea that there has to be a huge hurry. If the market is so messed up that a week’s delay would cause huge damage, then it’s too far gone anyway. There was, and is, time to work out a good solution, or at least a solution that doesn’t consist purely of giving money to Paulson to hand out to his investment banker buddies without any meaningful oversight.

The plunge in the stock market also isn’t a sign that they should have passed the bill. The idea that the stock market is an indicator of overall economic well-being is ludicrous, as should be evident from how it often rises on news of high unemployment and falls on news of low unemployment… It indicates, to an extent, how wealthy sectors of this economy are doing, but that’s all. Trying to ‘fix’ the overall economy by giving money to the stock market is like trying to warm yourself by pointing your only heat source at a thermometer instead of at yourself.

That’s not to say that the “ordinary” economy won’t suffer. It will, and there are likely to be painful days ahead for most Americans. The bailout, however, would likely have staved those off a little and at the same time made them yet more painful.

It was very easy to answer the “who benefits?” question for this one. The bankers would absolutely be the prime beneficiaries. The argument was that this was somehow unavoidable, necessary, and that we all might perhaps also benefit from it, if things worked out a certain way… an outcome that would, not coincidentally, largely be determined by those same bankers who were benefitting from it, and who have shown such tremendous responsibility and loyalty to the greater good thus far.

There were only five reasons to vote for this thing:
you’re an investment banker or an ally of theirs;
you’ve panicked and think that you have to do something, even something stupid, rather than taking the time to figure out the right answer;
you’re some kind of Leninist mole who believes that only by encouraging the worst excesses of crony corporatism can the ideal conditions for revolution be sown;
you think Paulson and his friends would use the money wisely and altruistically and hence benefit America as a whole;
you’re an idiot (which is more or less the same as the previous option).

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