America’s bad luck was that the bombs started shaking Wall Street on the eve of a national election.
The public hates even the much-improved $700 billion plan to keep the explosions now rocking the international financial system from going nuclear. For good reason, Americans largely blame the crisis on greed- driven, reckless executives who lined their pockets with millions of dollars while sabotaging the global economy with instruments of concealed risk.
Another time of year, Congress would likely have bucked the backlash. But with the looming election, some of its members – especially in the House of Representatives – are spooked by the demands that they co-sign a $700 billion rescue that looks like it benefits many of the same corporations that helped create the crisis in the first place.
Political skittishness played a part in the legislation’s 228-205 failure Monday in the House. That, combined with a rigid free-market theology that left many Republicans hostile to any federal intervention of this magnitude. Jeb Hensarling, a Texas Republican leading the House revolt, said that the plan would put the United States on “the slippery slope to socialism.”
Anything like socialism has been discredited in this country for many decades. But apparently that boogey-man is scarier than a slippery slope to what could be the worst recession in memory – unless your memory stretches back to the 1930s.
Investors’ verdict on the House’s failure to act was a shocking 777-point drop in the Dow Jones industrials. In terms of points, that was the greatest plunge in Wall Street history. Apparently the nation’s monied interests had been anxiously hoping Congress would hoist the hammer-and-sickle over the nation’s capital.
Opponents of the plan are right in one respect: There’s absolutely no guarantee it would avert further bank runs and massive failures in the financial sector.
Even if it worked, it wouldn’t magically restore the fortunes of terminally ill companies or make credit flow as freely as a couple years ago. Of course, cheap money was a major reason so many lenders started pushing time-bomb mortgages in the first place.
But cheap loans aren’t the issue anymore; what’s at stake is the availability of any money for much of the activity – business expansion, home loans, etc. – that drives the U.S. and international economies. And if Wall Street keeps on spiraling downward, many investment-dependent retirees beyond their earning years will face a bleak old age.
The buyout promises no miracle cures, but it looks a lot better than fiddling while Rome burns. There’s an old free-market credo: “Don’t just do something, stand there.” That’s good counsel much of the time, but right now it looks like a formula for catastrophe.
Reportedly, the House will revisit the plan later in the week. Maybe the Finger-in-the-Air Caucus will be having second thoughts by then; maybe things will have gotten even scarier. If that’s possible.
