I haven’t posted much on the bailout, because I needed time to digest what was happening and really think it over. (Which is going to be the theme of this post, if you read the title correctly.) I can’t help but smile to think of how things have gone down, in a sense. The Bush administration deliberately set out to cause a panic in order to get the most money they could with the fewest number of strings attached. For a time, it looked like it was going to happen. But the Founding Fathers created a system that is supposed to move with deliberation and be accountable to the voters, and sure enough, this time it worked. The Bush administration has always operated under the assumption that deliberation is their enemy, mostly because they have a bunch of ideas that won’t pass scrutiny. Finally, Congress is doing (part) of their job.
I tend to lean towards thinking a bailout is necessary. That said, I’m also increasingly glad it failed because so many Congress critters with contested seats had to face a hostile voting public. Instead of feeling torn between a sense that something has to happen right now and that they also need to keep their seats, Democrats should be grateful that the public bought them time to spend between here and the election working out a long option list and brainstorming creative ideas to make any bailout more progressive (how about using some funds for buying people’s houses for them and then reselling them back to them with fixed rate, low interest loans?). Because no matter how urgent this bailout feels, the election is more important. Whatever disasters happen between now and the election are minor compared to the disaster of letting Republicans take back power during this time of crisis. Republicans will fuck it up. They’re congenitally incapable of treating situations like these as little more than opportunities to jackhammer a bigger wedge between the fabulously wealthy and the rest of us. The decision appears to be between sitting on this bailout and potentially losing the election in a big way because angry voters punish incumbent Democrats. The latter is by far the worse option. Because the economic fallout isn’t going to end after a bailout. I suspect we’re facing many problems down the road. We need people in office who aren’t ideologically opposed to progressive legislation or taxation.
But Amanda, you are about to say, isn’t that sleazy? Isn’t it unfair to the voters to bank unpopular legislation until after an election? It would be if you were hiding what you’re doing. But Democrats should be bold on this, and not only delay legislation, but campaign on the fact that they’re doing this. Democratic candidates can go back home and tell voters, “Republicans, who got us into this mess with their crazy belief in unregulated markets, are now trying to squeeze the taxpayer for $700 billion. Can they be trusted to do this right when they and their ideas got us into this situation in the first place? Now that the bailout has failed, we’re dedicating a research team to the task of studying the problem, and if I’m re-elected, we’ll pass a responsible plan that will not just be a giveaway to the people who got us into this situation. But it’ll be a plan to make sure that your grocery store will still have food on its shelves, and that your bank doesn’t close its doors. We’ll also make sure to address the problems of the people hurt most by this financial collapse, the homeowners who are facing eviction because they couldn’t afford their escalating mortgage payments. And we’ll hold the people who got us into this accountable. There will be no golden parachutes for executives who got us into this, and Wall Street is going to be forced to play by the rules of fairness and transparency that rule Main Street.” Or some variation therein. I think between now and the election, the public will warm to the idea that we need to do something, but they’ll only come around if they understand it better, and if there’s plenty of accountability and help for the people who got screwed over by banks desperate to try to keep the illusion going.
Wall Street won’t like being made to wait, but a lot of the crashing is due to panic. Knowing that something is coming would slow the panic. Right now, things are mostly haywire because investors have no information and are flipping out.
By the way, this financial breakdown is swinging the election towards Obama. Democrats are able to come to the public from a position of strength, and they need to take advantage of that.
By the way, Marc suggested I share my metaphor of how we got into this situation with everyone, because metaphors about candy and Halloween were not doing the job. And I think that merely dismissing everyone in the country who played a part as a big meanie greedhead is a pointless exercise. Creative financing is cheating, at its core. It’s using financial trickery to make your books look fatter than they should. In that way, it’s exactly like steroid use in sports. And as much as people like to get on their moral high horse about steroid use in sports, it’s more practical to view steroid use as an inevitable flaw in the system. Athletics is so competitive that eventually someone is going to give into the urge to cheat with steroids. And as soon as one guy does it, the stake are raised, and more guys are going to do it in order to compete. Before too long, the guy who doesn’t use steroids is the oddball, because steroid use has become a minimum requirement to compete. Interestingly, McCain and Palin are bashing Freddie Mac and Fannie Mae every time they turn around, mostly because they like to confuse people about Fannie & Freddie’s status (they were private at the time they got involved in these sort of creative financing schemes, but McCain/Palin would love to have you believe they were public—by the way, it’s that sort of piddling around and ideological potshot taking is exactly why Republicans can’t be the economic leaders next year and going forward), but the banks were exactly the sort of late arrivals to the cheating game that started cheating because everyone else was doing it.
Free market ideologues would have you believe that errors like creative financing correct themselves, and using the steroid example, we can see how that would work. If steroid use runs unchecked, it will get to the point where athletes are dying left and right from heart attacks because they pushed their drug use too far. And eventually, the sport would have to be shut down because the costs would be too high. So, yes, the system would correct itself with a total collapse. Or, you can introduce regulation, which is what sports franchises do, because they aren’t blinded by ideology. You test players for drug use and you punish drug users. That doesn’t mean there won’t be some people slipping in, but if the system is sufficiently powerful, the drug problem will be minimized.
By the way, the fashion industry is facing a similar problem with eating disorders. Consider anorexia a form of cheating for models. Once one model developed anorexia (or the appearance of it), the bar was raised (or lowered, really) to an impossible level for everyone else, and soon to be a model you pretty much had to have anorexia. This problem cannot be fixed without some kind of intervention, even if it’s something rough and brutal like having minimum BMI requirements on the runway.