Post Bailout Politics

Paul Mirengoff at Power Line provides John Boehner statement on the bailout:

The passage of this flawed but necessary bill is not cause for celebration.

The financial crisis is not a failure of the free-market system. It is a failure of a broken Washington, and a government culture that allowed executives at Fannie Mae and Freddie Mac and other firms to run amok, ultimately imperiling our nation’s economy. For years Republicans warned of this danger and advocated reform of these government-sponsored enterprises. And for years such reforms were thwarted by legislators with deep political ties to the worst offenders, putting the companies’ interests ahead of the interests of our country.

House Republicans stood on principle throughout this process. We secured numerous reforms on behalf of American taxpayers, such as raising the FDIC insurance cap, the SEC’s change to mark-to-market rules for certain assets that have worsened the credit crisis, and an insurance program that forces Wall Street to bear a financial burden in the rescue package. Republicans also were successful in stripping from the original Paulson-Democrat bailout plan of its special-interest earmarks for trial lawyers, labor bosses, and thinly-veiled political organizations like ACORN. This significantly improved legislation is much stronger than the initial Paulson plan and protects the interests of families, seniors, small businesses, and all taxpayers.

John Boehner is right. Hopefully, Republicans and conservatives will be able to unite behind this truth and get the American people to understand that the Republicans are working to create wealth, prosperity and security from terrorists while Democrats are working to create poverty, stagnation and uncertainty over America's ability to forcefully counter threats from terrorists.

The world will end tonight

I have had quite a few posts spelling out my position on the financial crisis. So when I read the following post by John Hinderacker at Power Line, I thought it was a fair critique and apropos. Especially the following sentiment:

The bill failed in the House on Monday, and the sky didn't fall. Those who predicted doom are a bit like the cartoon characters who don white robes and climb mountains carrying signs that say "the world will end tonight." They feel silly when the sun comes up the next morning.

It made me feel rather foolish. However, after reading the following post by Eric Posner at the Volokh Conspiracy, I am no longer felling like a "cartoon characters who don white robes and climb mountains carrying signs that say 'the world will end tonight'." The most relevant passage is as follows:

I ought to point out that, in any event, the Fed and Treasury have already made plans to go ahead and lend all the money that you thought Congress had voted down. They are doing so because Congress gave them the authority to do this in statutes enacted long ago, and charged them with the responsibility of resolving financial crises, which is exactly what they are trying to do. It is odd that the critics of the bill are not trying very hard to persuade the Fed to back off. What the Fed and Treasury want from the bailout bill but are not getting (so far) is additional political backing to help restore confidence in the financial markets. One might think that if all this money is going to be spent anyway, the case for the bill, which provides for additional tools and oversight, is rather strong.

Mark Levin on the bailout

Mark Levin has a face for Radio and a voice for writing (in spite of that awful voice, I understand his radio program does quite well). Mark thanks the House Republicans for their actions and says:

The liberal uses crises, real or manufactured, to expand the power of government at the expense of the individual and private property. He has spent, in earnest, 70 years evading the Constitution's limits on governmental power. If conservatives don't stand up to this, who will? If they don't offer serious alternatives that address the current circumstances AND defend the founding principles, who will?

Everything Mark says is true. The problem is that the House Republicans actions might make the crisis worse. If so, liberals will have a real/manufactured crisis "to expand the power of government at the expense of the individual and private property".

Stock Market Drop

Ilya Somin at the Volkoh Conspiracy writes:

The stock market's record 778 point drop today will no doubt lead many people to conclude that the House of Representatives was wrong to vote down the bailout plan backed by both the Bush Administration and the Democratic leadership. Indeed, Senate Majority Leader Harry Reid has already made that argument. ...I think such claims are wrong.

What is good for stockholders isn't necessarily good for the economy as a whole.

Past history shows that stock market drops, even big ones, don't necessarily cause longterm damage to the economy.

Those are fair points, but I wonder how far the stock market has to drop before those who oppose the bailout tend to change their point of view.

Rosh Hashannah?

Joshua Zumbrun and Brian Wingfield write:

A new vote today or tomorrow, however, is unlikely as many Jewish members of the House will be away tomorrow to observe Rosh Hashanah.

I am sorry. I do not mean to be rude or disrespectful, but Congress needs to get back in session and get a plan that can pass. Preventing financial chaos is more important than showing deference to Jewish members. I would hope God would be willing to forgive those members who choose to work on Rosh Hashannah.

Great Depression of '09

Irwin Kellner writes:

...this is not a depression in any way shape or form.

While I am at it, I would like to take issue with the almost ubiquitous use of the word "bailout" to describe the government's rescue package.

Folks, this is not a bailout of anyone, not Wall Street, not Main Street, and certainly not the so-called "fat cats." It's an infusion of liquidity, designed to unclog the financial markets. In doing so, it will benefit everyone, business and consumers alike.

Being in a depression and being on the verge of going into a depression are 2 different things. Those who are talking of the depression are warning that the United States is on a verge of going into a depression. Let's hope that they are wrong, but I fear that they are right.

A Pox on both your houses

MSNBC Reports:

The House on Monday defeated a $700 billion emergency rescue for the nation's financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive into recession without it.

What a way to waste a weekend. Negotiators worked nearly all weekend trying to reach a compromise, and the deal is rejected.

The Market Crashes

Milton Friedman on the Great Depression

http://reason.com/news/show/129017.html

...it is striking how free-market economics have no place in the current debate. They are not seen as a credible response to a Wall Street crisis, even by the presidential nominee of the Republican Party, who is angrily attacking the "greed of Wall Street." Contra Naomi Klein, an economic shock has sent Republicans skittering away from free-market theories; the last thing the party of small government seems interested in letting markets work.

Unfortunately, some libertarians and conservatives need to brush up on the teachings of Milton Friedman.




In case anyone misunderstands my point, Milton Friedman endorses the view that it is necessary for Federal Reserve to prevent contractions in the money supply. That is what financial crisis and negotiations over the bailout are all about.