Monday, September 29, 2008

Bailout Fails -- Who Benefits?

The House voted 225-208 against the proposed White House/Congressional bailout plan. About 60% of House Democrats were in favor, and only a third of Republicans.

What this means now is anyone's guess. Bush's failure here means he may well be the next president to preside over conditions that precipitated an economic depression. The do-nothing option in this crisis is far worse for everyone involved.

But who benefits? Well, home loan applicants, for one. Today, the 10-year bond, which is the bellwether for long term mortgage rates, has so far falled nearly 0.25%. Now a buyer can secure a new mortgage for under 6%, which are the lowest rates in nearly four years. Investors in Treasury bonds will also benefit, as people flee the volatile stock market for the full faith and credit of the United States (which, actually, is something I don't quite understand given the mess we're currently in). Also, depositors can find great CD rates now, as banks are scrambling for money.

In the end, though, no one really benefits, and almost everyone loses without a fix in place. Letting the market handle this is dangerous. Banks don't want to lend away the money that they do have for fear that the collateral may lose value. Consumers don't want to spend money and lose savings and incur more debt. Businesses don't want to invest in new employees, so jobs slow down or stop entirely.

One person who might benefit from this is John McCain. By going to DC and putting a monkey wrench in the process of formulating this fix, he might come out of this looking like a hero for keeping this monkey off the backs of the American people. And watch for his ads to start touting his singular role as the lone "maverick" voice for sanity amidst this financial panic. Just watch.

Still, this could blow up in everyone's faces, including Obama's. He supported the bailout plan, which many voters did not trust.

I think that failing to dedicate enough time to explain this plan to the taxpayers is the main problem. Bush going on TV and painting this doomsday scenario may have worked before invading Iraq, but we're a little smarter now (a little, not a lot). We see through that bullshit.

No, what we need is the equivalent of a town-hall meeting, albeit on a massive scale, in numerous locations, with members of Congress going out into the towns and explaining what this bill looked like, what were the pitfalls, and what were the proposed benefits. Allowing for questions from the voters, the government would look appropriately humble in the face of this huge mess that federal deregulation allowed, and that a Congress in lock-step with Bush created.

But maybe this is the price we all have to pay for signing over our intelligence and trust to people who did not earn it.

No comments: