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Time to bail out the bailout

[ 25 ] September 29, 2008 |

As a friend of mine puts it, if McCain doesn’t announce another faux campaign suspension, how will we be able to take the first faux suspension seriously?

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  1. McKingford says:

    Well, he doesn’t have any impending late night talk show appearances to blow off…

  2. jon says:

    I’d take McCain a lot more seriously if he held his breath until he turned blue. That, and also stamped his feet.
    Nothing more mavericky.

  3. lemuel pitkin says:

    Can we pause a moment and just appreciate the awesomeness of this moment? The Masters of the Universe thought they had this one signed, sealed and delivered. But once again, turns out they weren’t as smart as they thought.
    No matter what, we can be sure of two things: Whatever eventual plan passes will be better than the one just voted down. And, a lot of very rich people are very unhappy right now.
    A good day.

  4. Malaclypse says:

    Can we pause a moment and just appreciate the awesomeness of this moment?
    The part that gives me serious cognitive dissonance is that it was the House Republicans who killed it. I’d make some comment about blind pigs and truffles, but I understand that would be insulting to Sarah Palin.

  5. Tom Hilton says:

    No matter what, we can be sure of two things: Whatever eventual plan passes will be better than the one just voted down.
    How do you figure that? It was Republicans and Blue Dogs who voted it down; any plan that’s actually better isn’t going to appeal to them.

  6. Hogan says:

    It was Republicans and Blue Dogs who voted it down; any plan that’s actually better isn’t going to appeal to them.
    I count thirty no votes from members of the Progressive Caucus (roll call here, members of Progressive Caucus here. More than enough to pass something better.

  7. aimai says:

    yeah, I think the thing is that depending on how this affects the election we might get a lots better bill out of it–some people are going to be lame ducks after november 4th. Brad delong is advocating a buffy-like “salt the earth” strategy. nationalize the bastards and make the republicans pay. I like it.
    aimai

  8. lemuel pitkin says:

    It was Republicans and Blue Dogs who voted it down.
    This assertion is empirically questionable.
    Kucinich voted no. Jesse Jackson Jr. voted no. Loretta Sanchez voted no. Jose Serrano voted no. Kristin Gillibrand voted no. John Lewis voted no.
    Look at the roll call. Basically, Dems who opposed it were (a) ones in swing districts, especially first-termers and (b) progressives who are not in leadership positions.
    As for why the next one will be better: This bill was specifically negotiated to get significant Republican support. Important concessions — on executive pay, on giving judges the right to order renegotiation of mortgages, etc. — were made for that reason. A party-line bill means a stronger bill.
    And that’s the worst case. The best case is that waiting til after the election — as now seems likely — will give enough time for people to realize that the entire approach is wrong. Either nationalize failing banks or, maybe better, let them fail and use the resources of the federal government to protect the real economy from serious disruption. You could do a lot of that with $700 billion.

  9. lemuel pitkin says:

    I count thirty no votes from members of the Progressive Caucus (roll call here, members of Progressive Caucus here. More than enough to pass something better.
    Exactly. No Republicans = more leverage for the left.
    Remember, folks, despite some tweaks this was still the Bush administration’s plan. Its defeat is a good thing.

  10. Rob says:

    LP,
    Republicans voted against it at a much higher rate than Dems.
    I’m not saying that you’re wrong about the eventual outcome. I haven’t the faintest fucking idea what just happened, whether it was good or bad. It does worry me that something the Republicans like a lot less than the Democrats just failed, though.
    I understand that this was the entire point; scare people into passing the bill. But no shortage of smart people who know economics are plenty scared. I don’t know economics, but I’m scared, too.

  11. aimai says:

    Why can’t the dems learn from the republicans. They should structure a really, really, really great partisan progressive bill in which the taxpayer gets all kinds of guarantees and paybacks–tangible and intangible, and force a party line vote and refuse to let the mavericky republicans take any credit for it. That’s what the republicans have done over and over. If the bill is a bad bill and the public won’t support it why should the dems/progressives support it. Make it a better bill and defenestrate the republicans.
    aimai

  12. lemuel pitkin says:

    I’m not saying that you’re wrong about the eventual outcome. I haven’t the faintest fucking idea what just happened, whether it was good or bad. It does worry me that something the Republicans like a lot less than the Democrats just failed, though.
    My understanding of what happened is that the Democratic leadership agreed to a number of concessions in order to get sufficient Republican votes to pass the bill. But then the Republicans failed to deliver the promised votes. This is what Josh Marshall, Atrios, etc. are saying and it seems consistent with what actual reporting there is so far.
    If the House leadership had known from the start that the vote would be on something like party lines, then (1) they would not have abandoned components like mortgage renegotiation and (2) they might have had to make additional improvements to hold the party’s left wing, which disprportionately voted against the bill.
    It may well be, as Dean Baker has been arguing, that this is actually the best outcome — the danger to the real economy is probably being exaggerated by people who have a financial interest in the bailout. But suppose we do have to have one: Is there any reason to doubt that a bill passed in a party-line vote would nto be significantly better than one written to get significant R support?

  13. McKingford says:

    Lemuel, I think you underestimate the number of spineless Democrats who won’t vote for a bailout bill – no matter how progressive (or perhaps *because* progressive) without the political cover they will get from having Republicans also supporting the bill. In short, they are the ones who do not have the courage of their convictions.

  14. aimai says:

    McKingford,
    I don’t know that I agree–and certainly I don’t think that can be imputed to an imaginary better bill.
    aimai

  15. tomboy says:

    MCCain will suspend his campaign to have a chat with 20 or so House republicans, and convince them to change their minds for the good of the country.
    McCain will take credit for the bailout, “putting country first”, and all the other BS.
    I suspect this was planned a few days ago.

  16. lemuel pitkin says:

    I think you underestimate the number of spineless Democrats who won’t vote for a bailout bill – no matter how progressive (or perhaps *because* progressive) without the political cover they will get from having Republicans also supporting the bill.
    Maybe but (1) the House leadership did not put a lot of pressure on wavering Ds to vote yes. Leadership in the House has a lot of power; if Pelosi was absolutely committed to carrying this, she could move a lot of Dems — especially the spineless ones who will be worried about committee assignments, their ability to deliver funding to their districts, etc. And (2) many of the D votes against came from the *left* of the party. These people were showing a trememndous amnount of spine. If their votes were needed, we would have a much better bill. Finally (3) after November 4, the need for political cover is a lot, lot less.
    The Rs went all-in here but the truth is they are holding a much weaker hand. If this gets delayed til after the election their leverage is gone. So again, a good day.

  17. tomboy says:

    Also, for everyone that thinks today was a good day, wait until Citigroup, Bank of America, JPMorgan Chase, or Wells Fargo experiences what just happened to Washington Mutual and Wachovia .
    It will be UGLY. And not just for the rich.

  18. lemuel pitkin says:

    OK Tomboy: what *would* happen? Specifically.

  19. lemuel pitkin says:

    I meann, here’s what happened to Wachovia: It merged with Citigroup on terms that were not very favorable to shareholders. Boo hoo. But if you had an account at Wachovia, you didn’t lose a dime. All its branches are still open. Small businesses that had lines of credit with Wachovia still have them. Etc.
    Hysteria ain’t helpful.

  20. tomboy says:

    lemuel pitkin,
    You are ignorant of the situation. There is noone that could take over Citigroup, or WFC, or JPM, or B of A. They are in the world’s 20 largest financial institutions. There just aren’t buyers for these companies now, especially Citigroup, B of A, or JPM.
    There would be NO buyer. Just lots of people taking their money out, tons of job losses, and the FDIC on the hook for deposits. Not to mention all the collateral damage from CDS contracts. I can only imagine what outstanding contracts look like for JPMorgan/Chase. It is because of JPMorgan/Chase’s huge involvement in the derivatives market that they were asked to take over Bear Stearns and Washington Mutual – lots of credit default swaps of these institutions were written by JPM, meaning it was cheaper for JPM to take them over than to pay insurance on their default contracts.
    What would happen if JPM were to default? the sputtering banking system we now have would be non-existent. They have TENS OF TRILLIONS in credit default swaps contracts outstanding.
    Indymac, a tiny institution compared to these giants, couldn’t find a buyer and will cost the federal government almost $10 billion. JPM, C, WFC, and BAC are all MANY, MANY times the size of indymac.
    Just because you hate the rich doesn’t mean you should cheer for the total collapse of our financial system. The results, as I said before, would be UGLY for everyone.

  21. Law Prof says:

    Agree with LP. This has been a very good day, IMO. The market will go down for a year or two, and … so what? Companies with no real assets/sales will merge or go under; Microsoft and Proctor & Gamble will be just fine. The only near-term (6-month) suffering will be by seniors who rely on dividends to pay the bills. I’d rather help those folks out directly than purchase sub-prime mortgage “investment vehicles” at inflated prices, just to save people who should have known better than to invest in sub-prime mortgages. There are more productive things to do with $700 Billion

  22. MG says:

    Also agree with LP.
    Tomorrow won’t be a good day for hedge funds — it’s one of the four voluntary withdrawal days. And the next few years will be tough, particularly for those in the financial sector.
    But, it’s not the end of the world. It was a horrible bill with a bullshit “hurry up” schedule.
    I’m glad they voted it down.

  23. snarkout says:

    There is noone that could take over Citigroup, or WFC, or JPM, or B of A. They are in the world’s 20 largest financial institutions. There just aren’t buyers for these companies now, especially Citigroup, B of A, or JPM.
    Fortis, the Belgian bank that just got nationalized, is bigger than all of these except Citi, I believe. It’s not that any individual giant is too big to rescue – it’s that they collectively are, and that the credit markets as a whole definitely are. If the commercial paper market dries up, otherwise healthy companies stop being able to make payroll. That’s the big concern, just as the big concern with AIG’s near-meltdown wasn’t AIG but a seizeup of the CDS market setting off a horrible chain reaction.

  24. djw says:

    I think I agree, more or less, with LP but I’m uncharacteristically terrified that I might be wrong.

  25. (O)CT(O)PUS says:

    By all accounts, all bailouts stink to high heaven, but the point is not about retribution for those who caused the meltdown or about the excesses of laissez faire capitalism but about protecting millions of innocent people caught up and hurt by it. In other words, when a car hits a pedestrian, do you call an ambulance first or do you lynch the driver before giving first aid to the victim?

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