Monday, September 29, 2008

That’s Billion - With A “B”

O.K., it’s true. I took only two economics courses in college.

That said, here’s what I think about the current economic crisis.

When the U.S. House of Representatives failed to approve the 700 billion dollar bailout today, the U.S. stock market fell . The Dow Jones Industrial Average fell by 777.68; the NASDAQ by 199.61. That’s wicked freakin’ huge, but it is not (yet) catastrophic.

The fact that the U.S. House did not affirm the bailout today is likely a very good thing.
It may well give everyone a chance to breathe and caucus and simmer down a bit.
It may give Congress a chance to start over.

This whole bailout is being dealt with by the U.S. Government which is, by definition, a political animal. But with the Presidential election little more than one month away, the entire process has been supercharged - damn near to the point of electrocution - by political partisanship. That’s a bad thing - a really bad thing.

President George W. Bush and Treasury Secretary Henry Paulson wrote up this 700 billion dollar bailout in a proposal which was less than three pages long. We passed more papers than that to purchase our home which cost less than $100,000!

Bush and Paulson repeatedly expressed the urgency of the situation. The President went on the airwaves last Wednesday, with a glassy demeanor, using words like “danger”, “collapse” and “panic”. He scared my 84 year old mother. That’s never a good thing. But it made me begin to wonder if we weren’t being rushed; having something onerous forced upon us by an administration with a lousy record of decision making and an exceptionally high level of deceit.

Congressman Barney Frank (D - MA) and Senator Chris Dodd (D - CT) did a pretty good job of expanding the three page proposal from Bush and Paulson. They tried to build in protections for citizens, taxpayers and homeowners with mortgages. They tried to limit excessive benefits to the top dogs of the financial institutions at the heart of this situation. Then the rank and file got in the mix. Then John McCain supposedly “suspended” his campaign. Then the President summoned the Congressional leadership, plus John McCain and Barack Obama to the White House. All of this was swirling in the increasing din of politics and partisanship.

It was ugly. And it may well have been completely wrong headed. The flaw may well have been that everyone was working on that original three page Bush-Paulson proposal. Perhaps they should have been looking at the financial crisis with fresh eyes; not trying to make a silk purse out of a sow’s ear.

Enter Congressman Peter DeFazio, Democrat from Oregon. Two days ago, on September 27th, he wrote a letter to every Democratic member of Congress. In that letter he urged them to oppose the Bush-Paulson bailout. I encourage you to read his letter.

I don’t have a crystal ball. I don’t know what the stock market will do tomorrow. The investor in me wishes I had some spare cash to buy up a few bargain stocks. The saver in me is scared, because it’s our equity based retirement accounts which are effectively the “ox being gored” in this situation. But we’ve ridden out bad days and tough markets before. And if this is what it takes to get Congress to refocus its attention on the real problems and root causes of the financial crisis and away from the Bush-Paulson proposal, so be it.


dancingmorgan mouse said...

I know it's naughty of me but I'm hanging out for the US dollar to slip a bit in value, so I can make a big order!

Pink Granite said...

Hi DMM -
Actually, I think you're onto something there.
You're such an avid/voracious reader that one giant Amazon purchase from you would surely boost the U.S. economy!
On behalf of my fellow citizens, I thank you!
- Lee

dancingmorgan mouse said...

Unfortunatley the Aussie Dollar crashed last night, down to 79 US cents, no new books for me for a bit - bugger.

Pink Granite said...

Hi DMM -
Last night they covered Australia's stock and financial situation on the news.
Misery loves company, eh?
So sorry...
- Lee