Sunday editorial: Shock and awe
Seldom, if ever, has the American economy gone through a week like the one just passed.
It began with a $1.2 trillion loss on Wall Street as stocks dropped 8 percent in a single day. It ended with Congress passing and President George W. Bush signing a $700 billion financial market rescue bill that hardly anyone understands.
In between, the stock market recovered most of its Monday loss, but the American economy slid further into recession. Two major U.S. banks fought over the remains of a third, the government reported that 159,000 Americans lost their jobs last month and the governor of California — which, if it were a country, would have the seventh-largest economy in the world — is shopping for a $7 billion loan. And all of this took place against the backdrop of a presidential election that is just a month away.
In a normal week, any one of these stories would have dominated the news. In the week just passed, they fell one after another, like cluster bombs in a shock-and-awe campaign. And there was no place to hide.
That didn’t stop 228 members of the House of Representatives from trying to find one. They voted “no” on the first iteration of the financial rescue plan negotiated by the Bush administration and congressional leaders. That sent the plan down to defeat on Monday, leading to a 778-point drop in the Dow Jones industrial average and a further choking of the credit markets.
Cooler heads prevailed in the Senate. The upper chamber reconfigured the package to include a 10-year, $150 billion package of tax cuts and a temporary increase in federal bank deposit insurance limits. The good news: Middle-class taxpayers who could get clobbered by the alternative minimum tax got a renewed waiver. The bad news: Special interests (among them owners of auto race tracks, the rum industry, the woolen industry and — incredibly — the wooden-arrows-for-children industry) got tax breaks.
In the meantime, House members who voted “no” were hearing from businesses back home that they couldn’t get credit. They were learning that the $700 billion is largely an accounting figure, not an actual immediate cash payout. And they were realizing that the psychological effects of not passing the bill would create dire cash-flow problems for all businesses and individuals, whether on Wall Street, Main Street or Chouteau Avenue.
Three dozen House members changed their minds, and early Friday afternoon, by a 263-171 vote, the House concurred with the Senate bill — just in time for them to catch planes home to campaign.
And not a moment too soon. Fundamentally, the economy runs on credit, and credit runs on confidence. The credit crisis that started with subprime mortgage loans, and escalated with the Ponzi-like stacking of opaque financial derivatives atop those loans, had undermined that confidence.
Only Washington could restore it, and by playing politics with the rescue plan, Congress failed in its responsibilities. Americans deserved straight answers on complicated questions, not pandering.
Fortunately, grown-ups, including Democratic presidential candidate Sen. Barack Obama of Illinois, stepped in. So did Republican candidate Sen. John McCain of Arizona, although Mr. McCain’s bona fides as a born-again regulator remain highly suspect.
Both men now have an obligation to soothe the nation’s jangled nerves. Wall Street and Washington may be able to settle the fight between Wells Fargo Bank and Citigroup for control of Wachovia — something of major interest to the 4,800 employees at Wachovia’s St. Louis-based securities division. And the federal government will have to rescue — of all people — the one-time action hero Arnold Schwarzenegger, the governor of cash-strapped California.
But the nation as a whole is looking to Mr. Obama and Mr. McCain for reassurance, not platitudes, sound bites or empty theatrical gestures. Back on that overworked synecdoche called Main Street, Americans want to know things are going to calm down, that the country will play fair with them, that their jobs and families will be safe, that the bailout won’t leave them holding the bag for fat cats.
The candidate who can assure them of that will win. And should.
The media and wall street finally got what it wanted, a blank check of taxpayer money. What round of fear tatics did you have up your sleave if it didn’t pass the 3rd time? You know how sensitive the markets are, you have the power to declare the sky is falling and the markets go wild, regardless of the truth.
“cooler heads prevailed”… PLEASE! Voting to spend 850 billion dollars and I’ll bet not one of them could give me a detailed plan of where this money is going and how it will improve anything.
I don’t want to hear another word about needing experience or intelligence to work in Washington from either party!
> Americans want to know things are going to calm down, that the
> country will play fair with them, that their jobs and families
> will be safe, that the bailout won’t leave them holding the bag
> for fat cats.
Well, this bill DOES leave us holding the bag for fat cats. And our jobs and families aren’t any safer today than they were two weeks ago. And it doesn’t seem fair to me that, after rejecting the bill, they load it up with pork for a handful of special interests, and then pass it. So what exactly is it that we’re supposed to “know”?
Both candidates need to honestly address this issue with their plans to cut the budget. Clearly, the Obama Santa bag cannot be funded in the next four years without cutting other programs to the bone, if at all. I think the American people would appreciate someone who spoke honestly about specifics of how they intend to balance the budget. Ending the war won’t do it. There are not enough rich to soak. So, unless they plan a massive tax increase on the middle class, they need to just be honest enough to admit there aren’t going to be all these gold plated programs they are pushing. So far, Sarah Palin is the only one responsible enough to say, “live within your means”.
I have never been so disgusted by anything in my life. This bailout, brought on by scare tactics from the president on down, is the most basic violaton of democracy and everything this country stands for I have ever seen. This paper has constantly railed against this administration for “passing on this massive debt to the children and grandchildren”. Where is that now? We are talking about 7,500 dollars per taxpayer. For what? We may as well have flushed it down the toilet. Looking for Obama or McCain for reassurance? I was praying, praying, one of them would stand up and say that now is the time to demand personal responsibility, to let the reckless lenders and deadbeat borrowers pay for their own irrsponsible actions and move on. No, the “grown-ups” prevailed. Wow, the banks and non tax paying types who borrowed this money held their breath and screamed, and rather than ignoring them, like responsible parents would, the “grown-ups” gave in and we now have socialism, more massive debt, a plan that will be the biggest debacle in this nation’s history, and the Post Dispatch is waiting for a candidate to reassure them. Amazing. Good luck.
How is it, that a newspaper whose editorial positions are so widely disagreed upon by their paying customers, is allowed to stay in business.
Why do you think your readership continues to fall? The public, to a greater and greater extent, suspect that you are reporting news selectively and slanted and don’t like being told that their opinions are wrong.
Most people now have other means in which they can get their news. I hope you can get a more balanced editorial page before it is to late.
Wow! Talk about blaming the messenger! The P-D get 95% of their stories concerning the financial crisis from the Associated Press. They are the same stories that run in every other big daily in the country. The only alternatives are the NY Times (sometimes) and the Wall Street Journal (sometimes). The Associated Press doesn’t just make this stuff up. The facts and opinions come from a variety of sources, administration analysts, think tanks, advisors in the private markets… True, all of these guys have been pushing for the bailout, lest a worse fate threatens the American economy (their words). Why are you so surprised? Perhaps this will finally put to rest two popular myths: (1) liberal bias in the media, and (2) this country operates under a system of free enterprise. The market still operates on the age-old preservation of the aristocracy. They function under a system of supply and demand… and connections. Before you start blaming defaulting borrowers, welfare mothers, the disabled, illegal aliens, environmentalists, unions, and the “poor and wretched refuse,” ask yourselves “who is getting all this money?” Class warfare, anyone?
It would have been nice if one presidential candidate stood up and said NO.
Do you people know that in July a $300 billion bill was passed to help mortgagees? This bill was simply to bail out Wall Street.
I would have voted for the “real” change candidate. But no one showed up.
It doesn’t really matter who wins, they are all alike. And any of you who think there is going to be change, think again. Remember Nancy Pelosi screaming change is coming in 2006 with the most productive and ethical congress in history? Are you happy with what you got? Do you recall Clinton promising a middle class taxcut in 1992 and then he got in and said sorry, we can’t afford it.
If you want a good factual piece to read, read David Nicklaus’s piece in the Bus Section today. He knows what he is talking about unlike the PD editorial writers who know a lot about nothing.
Last week, I suggsted that the entire Congress should be replaced and we should start over. Several people cat-called my sentiment. Today, a Rasmussen poll says 59% of Americans agree with that idea.
http://www.rasmussenreports.com/public_content/politics/election_20082/2008_presidential_election/59_would_vote_to_replace_entire_congress
I heard a pundit say on CNBC the other day that “most Congressmen come out of the liberal arts schools and are not capable of comprehending complicated economic theory.” As someone who also comes from a liberal arts background, I have to agree with him. But, its not only finance. These people, most of whom were government majors also must struggle with technology, energy, pollution, education, etc. Certainly, I am not saying that every member of Congress should be an expert in every area, however it is time that the make-up of Congress be more diverse. We could use a few boring CPA’s (they would have seen this mess coming), some farmers, a few teachers, some union tradesmen who know what it is like to build something, how about a couple of engineers? Congress should not be comprised of lawyers. If the near bankruptcy of our country is not enough to end the entrenched political class, I don’t know what will.
— A CENTRIST
“Do you recall Clinton promising a middle class taxcut in 1992 and then he got in and said sorry, we can’t afford it.’
We’ve been through the details of this on several other forums.
Here’s the story again.
o In 1993 Clinton cut spending and raised income taxes on the upper class and businesses in 1993, with absolutely zero affect on the income taxes on the middle class. The actions, has been credited as the major cause behind the deficit reduction and eventual surpluses during the 1990s, by sources such as the non-partisan CBO.
o In 1997 Clinton reduced income taxes across the board and reduced the capital gains tax.
http://en.wikipedia.org/wiki/Omnibus_Budget_Reconciliation_Act_of_1993
— jjk
“. .These people, most of whom were government majors also must struggle with technology, energy, pollution, education, etc. Certainly, I am not saying that every member of Congress should be an expert in every area, however it is time that the make-up of Congress be more diverse.. . ”
Seems there is lots of griping about Congress but the dissatisfaction must be with somebody else’s representatives because the overwhelming majority are reelected.
There are lots of civil servants in all departments of government who are very specialized and the real experts. The opinions of these experts are actively solicited by the decision makers.
Senators and Congressmen are the decision makers and each has a staff that research for them, including talking to the experts. Not that having more specialists would be a bad thing, but getting an education usually provides you a speciality and more importantly it teaches you to think. Not that we can’t each find exceptions to my last sentence.