Washington Donkery Rant
Sheer craziness. The House of Representatives wowed the nation and the world on Monday by voting down President Bush's bailout bill, sending U.S. stocks reeling in a sickening shockwave that saw the Dow Industrials drop by some 450 points over the span of 3 or 4 minutes around 1:30pm ET on Monday. I can't say that I've never seen anything like that happen before, but you really only do get to see that happen maybe once or twice in a generation, that kind of sickening, panic selling where it's obvious you have millions of people just selling anything they hold, with no regard whatsoever to the price of those holdings. The selloff, which ended up being a record one-day point drop for the Dow of over 777 points and nearly 10% in the major indices as a whole, underscores the delicacy of the situation the U.S. financial system is currently in, which poses an absolutely unique pickle for lawmakers, investors and consumers in the U.S. economy.
On the one hand, it is obvious that the American financial system needs something to be done, and fast. It probably needs to be something dramatic, and it is likely going to require some kind of an unprecedented move given the state of shock that the credit markets in this country are in. There are things happening in the bond and other credit markets that have not been seen in any of our lifetimes. In just the past month basically, Fannie and Freddie, the two largest owners of mortgages in the world, have falled and needed to be completely taken over by the U.S. government. Lehman Brothers went bankrupt, following in the footsteps of fellow investment bank Bear Stearns earlier this year. AIG, the world's largest insurance company, essentially failed and needed a loan of 85 billion dollars from the government just to manage to stay afloat for a short while as it ponders how to return to some stability. Merrill Lynch, the third-largest of the five independent investment banks that existed some nine months ago, was basically a day away from filing for bankruptcy, and the federal government orchestrated its sale to Bank of America to save the system from that happening. WaMu, the nation's largest savings bank with deposits of some $350 billion, failed and was seized late last week, sold for peanuts to banking titan J.P. Morgan Chase. And now on Monday this week, Wachovia Bank, another former banking giant in this country, also essentially failed, with the government having to step in to orchestrate its sale to Citigroup, also basically for peanuts, with the FDIC agreeing Bear Stearns-style to backstop the vast majority of potential losses on Wachovia's $600-some billion portfolio of troubled mortgages.
So the banks in this country are failing, left and right and left again. Failing, as in, gone. Forever. And I don't just mean smaller regional banks like IndyMac which went bust a few months back. I mean big dogs, the Bears and the Lehmans and the WaMus and Wachovias. And now we're beginning to see some of the largest banks outside of the U.S. crumble as well. The system is quaking in the knees, has been for a good few months now, and I am in agreement with President Bush that something does need to be done. More than all the failures, it's a cold hard fact that most average-joe consumers in the U.S. economy have no insight into or understanding of that credit between banks has frozen to barely a trickle. We've seen interbank lending rates -- the interest rate that banks charge to one another for short-term loans that happen -- or more accurately that used to happen every single day as a matter of course -- triple, quadruple and even quintuple just over the past few weeks as banks fear never being repaid by their counterparts in other parts of the country or the world. The yield on short-term Treasury Bills -- considered to be essentially the safest investments in the world today as they are backed by the U.S. Treasury -- has dropped so hard in just the past few days that it is truly frightening. Basically after the past few days, people are willing to take very close to 0% return over three months and even over a full year, just to ensure that their money does not lose its principal while the rest of the investments out there seem so unsafe. As I said above, things are happening in the world of finance that you simply never ever see otuside of just now and maybe once in a generation or three. So on the one hand, it is obvious that something dramatic clearly needs to be done, and fast.
On the other hand, though, I have to admit I am proud as hell of the House of Representatives. After all, even with the changes made over the weekend that clearly make the Bush bailut bill more pallateable -- or let's say, less unpallateable -- it is still a shitty bill. Highly shitty. I mean, the bottom line is that there is absolutely no understanding whatsoever of the How of this bill, or even the Why. Yes, I know something needs to be done, for sure. But Bush and his cronies at Treasury and the Fed have put forth a $700 billion package to buy up all the crappy mortgages held by the banks of this country as the only choice as to how to address the serious problems facing the banks right now. But is that really the only option? It would seem that the answer is obviously not. Republicans in the Senate tried to push over the weekend a proposal that would allow the banks to purchase insurance on their bad debts from the Fed instead of the government outright buying that debt. Others have suggested increasing deposit insurance limits, injecting more cash into the system, lowering interest rates, or even some bills which aim to bail out the consumers in this country instead of going directly to the banks and helping them. Frankly, I'm not trying to suggest that I know the answer. I love these clowns who love to say "Well, you can't think of anything better, so we have to do this bailout right now!" You know what, bozo? I'm not an economist. I'm not in the government, I'm not a politician, and I don't work in finance. Just because I can't think of a better answer than simply buying $700 billion worth of bad investments carelessly made by Wall Street, does not in the least mean that this is the only workable plan. The mere suggestion that I, or you, or any individual reading this is somehow oblgiated to think of a better plan or else we must believe that the one put forth by the former co-CEO of Goldman Sachs is the best plan imaginable is the height ot stoopidity, to the point that it's not even worth addressing.
The bottom line is, this bailout is a shit-filled idea, and everybody knows it. But what went on in the House yesterday is truly mind-boggling when you think about it. The Senate spent all weekend wrangling with the administration as well as political opponents to come up with a bill that compromised enough that they believed it could pass through Congress. Amazingly, those donkeys didn't even include the right people to reach an actual consensus that could actually get approved! It is unreal how redonkulous these people are. Stay up late working for 72 straight hours to reach accord on something, and in the end you never even had the right people there in the first place. Hard to believe.
But more than that, looking closer at the votes in the House is really what shocks me the most. This bill, remember, is a Republican bill, coming from the President himself along with his Treasury Secretary and Fed Chairman. But even though it was put forth by the Republican president, just look at what happened on the floor of the House. The Democrats in the House voted about 140-90 in favor of the bill. Not exactly overwhelming approval, but surely enough to contribute to a victory in a majority-wins vote. But among the Republicans in the House, the bill went down about 133 to 65. Just think about that. More than two-thirds of the President's own party voted against a bill that not only he brought to the table, but that he went on tv last week to explain how utterly and completely urgent it was to pass. I mean, this guy laid it all on the line with this bill, and less than a third of his own party voted for it in the end. Less than a third!! I am still trying to get my arms around that fact, in that it is something I can never recall happening with a key piece of legislation like this in my entire life. Torpedoed by his own party. It just goes to show how little credibility this guy really does have these days. I wrote about it last week, but the Republicans in Congress are truly sick and tired of hearing Bush's unending pleas for emergency this and emergency that, only to be proven time and time again that the man is full of shit.
And those of you who are inexplicably taking the "pissed off at Congress" take on this, let me just point out that it is Bush, beyond a shadow of a doubt, who is to blame for the entire selloff yesterday in the stock market. Two weeks ago nobody had ever heard anything of no $700 billion bailout package. It was a stoopid, shitty idea from the moment it was first suggested to the President, and he took the odd and obviously unspeakably foolish approach of going straight to the Congress and then to the American public with it in the most mass-media ways he could. More than that, and this is also something I mentioned last week, but when this guy went on television, he gave without a doubt the most doomsday speech given by any President in the last generation at least. He could not have been clearer that the country was perched on the precipice of financial disaster. He told everyone in no unclear terms that we unequivocally need this bailout package, and that if we don't get it, we are all deeply and profoundly fucked. Now, in case any of you are President of this wonderful country someday, take a lesson from this as to exactly why you don't say this kind of thing on tv. Because look at what happened -- Bush did not get his bill passed yesterday, and the very people who he deliberately scared the pants off of in a political attempt to get what he wanted, they all went and immediately called their brokers, sold everything they had and ran for the hills. After all, the President directly told them they were all screwed for years to come if this bill didn't pass, the truth of which, like all the other times Bush has cried wolf, is highly suspect.
But don't worry, there was Bush just minutes after the failed vote yesterday, chiding Congress for failing to act and directly blaming them for the huge selloff in the stock market that resulted. Republicans blamed Democrats, Democrats blamed Republicans, McCain blamed Obama, Obama blamed McCain, you name it and someone was pointing the finger in that direction. Meanwhile, in reality there probably should never even have been a mention of this shitty bailout plan a few weeks ago with so little of the details worked out or even thought of. There definitely should not have been this sky-is-falling speech on national tv from the President. Then there would have been no vote on Monday at all, and if there had, people would never have freaked out like they did when it failed to pass. But Bush will never see it that way. That man has obviously lost all credibility with the legislators in this country, and with the people now as well. Personally, I don't think either one of the current candidates for President seems like the type to be able to gain any widespread bipartisan support at all -- be it because of their beliefs and platform, their attitude and demeanor, or both -- but clearly the current adminiistration has lost all effectiveness here with nearly four months left in the current term.
The bottom line is, notwithstanding a bunch of socialists trying to say otherwise, this bailout from the getgo has been designed to bail out the banks, not the people, and the American people are fucking sick of it, in particular at having to foot the $700 billion pricetag to do so. If the government wanted to bail out the people, they could amazingly easily be doing so. Give everyone who owns a home a $100,000 cash rebate with that $700 billion that is proposed to be given to the banks instead. Or more realistically, take the $700 billion and create a massive fund to help troubled borrowers who are in danger of defaulting on their homes. Use that money to encourage banks to rewrite distressed mortgages rather than foreclose on them. It cannot rationally be argued that the bailout is designed to help struggling Americans, and if people didn't fear for their portfolio values or their jobs or their homes, they wouldn't be trying to make this ludicrous argument. Clearly, from its core, the plan is designed to target banks and to help unclog the credit markets, not to directly help the U.S. consumer. Which shouldn't surprise anyone, since it was conceived and drafted solely by a guy who is the former co-CEO of Goldman Sachs in Hank Paulson. It's a banks' bill drafted by a banker in consultation from all his banker friends, which could easily be aimed at helping the people directly, but instead is solely aimed at helping free up banks, under some trickle-down sort of theory that this will help consumers in the long run.
What's more, you have got to love all these donkeys printing headlines Monday afternoon and on Tuesday like "Bailout Failure to Crush U.S. Economy" and "Congress Chooses Politics Over Economy" and the like. Even the suggestion that somehow the U.S. economy, which has been worsening and this year seems clearly destined for a solid recession that has obviously been a long time coming from even a cursory look at history, is only now going into a recession just because the Congress didn't pass this bill, is ridiculously integrity-less journalism to say the least, and biased politicism and unabashed stoopidity to be more honest about it. As I said, it's been almost a year now that the economy has been heading for a recession, and frankly if you exclude a few key areas we've already been in a recession for going on three quarters now. So you have got to be a brainless, clueless donkey to suddenly blame Congress standing up for its beliefs in the face of a universally-hated bailout bill here in late September 2008 as the thing that causes a recession. Why don't you just print instead the headline "I Am a Socialist", which is the exact same thing blaming the House of Representatives' failure to vote this bill through for the flagging U.S. economy, which has been fading fast ever since the financial leaders of our country all got burned nearly a year and a half ago now when their unbridled greed and complete lack of foresight finally caught up to them after nearly a decade of donkery. Reeeeeal smart right there.
And lastly, I can't help but end today by asking myself repeatedly wtf is up with all these people in Congress afraid to vote for the bailout because they're afraid of losing their seats come the November elections? This is something I will never understand about the U.S. system. If people think their consistuencies are so against this bailout, that them voting in favor it is going to cost them their jobs, then why the fuck is there any doubt at all about which way to vote on this thing? I don't get it. The past month's government interventions notwithstanding, this country is supposed to feature a government "of the people, by the people, for the people". As a member of Congress, if your people are so against this bill that you're going to lose your seat by voting in favor of it, then your people want you to vote against it! Get off your fucking ass and vote Nay already then! What is the god dam decision here? The people of this country largely hate this fucking bill, which is more than understandable since it is not designed to help them when it easily and obviously could be. So vote the dam thing down and do it confidently. It's your fucking job to do that, diggheads!