The Bailout is Dead, Long Live the Bailout

David Weigel | September 30, 2008

The New Republic's Eve Fairbanks notices that all but four retiring Republicans voted for the bailout bill; the bulk of the opposition came from conservatives whom people didn't take very seriously last week.

[It] highlights an increasingly dominant House dynamic: the rise of the conservatives, what a friend calls the proponents of "free trade, libertarianism, true free markets, freedom from government intervention in a wide range of sectors, true, rock-ribbed, hard core conservatism," led by younger Reps. Jeb Hensarling and Mike Pence. Hensarling and Pence flexed their muscles and showed their power by opposing this bill.

But the question is, well, what did all the flexing accomplish? Talking to Hill staffers today, I'm not convinced that the picture is any better for conservatives. (Certainly it's still pitch black for the resolute invisible hand crowd.) Both the Democrats and the Republicans are proposing new additions to the bill and making it clear what it would take to get them on board. Democrats are talking about adding unemployment insurance to the bill. The Republican proposals are summed up by CQ:

The Republican Study Committee, a group of conservative House Republicans, wants the core of the bill to create a government insurance plan for shaky assets, with premiums paid by financial institutions... [and] new Securities and Exchange Commission regulations prohibiting “mark to market” accounting, which requires companies to value assets based on their current potential sale price.

From what I've heard, adding one or both of the GOP's reforms to the bill that failed yesterday might bring on enough Republicans to pass it, if every Democrat voted the same way. Republicans are not at all sure that they're winning the PR war here. Constituent calls, which were running about 9-1 against the bailout on Monday, were running about 50-50 today, a development pinned on the stock market crash, media alarmism, and Sec. Paulson's grave warnings.

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Naga Sadow|9.30.08 @ 6:08PM|#

Pish posh, Dave. The bailout is dead!

Bitchin'!!!! Condo in Navarre . . . here I come.

xx|9.30.08 @ 6:14PM|#

The bailout must fail. I am not really down with paying for people's stupidity.
Won't someone think of the children.

Naga Sadow|9.30.08 @ 6:18PM|#

Or my condo!

The Wine Commonsewer|9.30.08 @ 6:18PM|#

The New Republic's Eve Fairbanks notices that all but four retiring Republicans voted for the bailout bill

While technically correct, that sentence made me say Huh? I had to read it several times and then click over to the article to be sure I didn't miss something cuz I was pretty sure about 2/3 of the GOP voted the bail out down.

|9.30.08 @ 6:23PM|#

Bailout, schmailout. The money guys vote with their, well, money. They're finding some ponies in the equity markets, and life goes on.

If this week proves anything, it's that the people who actually run the financial world can (and will) find a way to make it work if everyone else just gets out of their way.

Kolohe|9.30.08 @ 6:24PM|#

TWC-
glad I wasn't the only one

SIV|9.30.08 @ 6:25PM|#

Eve Fairbanks? I hear she will go out with pro-defense libertarian leaning guys.

vacillate wildly|9.30.08 @ 6:27PM|#

Living as I do in Liberalism Central (SF) I am still enjoying the shock and disbelief expressed by those around me that congress did not pass this bill. It's the apocalypse, dammit! Time to throw up our hands to the heavens and accept the state as our lord and savior! Why can't everyone see that?

Mr. X|9.30.08 @ 6:28PM|#

Sounds like a few more of us need to make calls to our Congressmen.

TallDave|9.30.08 @ 6:29PM|#

the proponents of "free trade, libertarianism, true free markets, freedom from government intervention in a wide range of sectors, true, rock-ribbed, hard core conservatism,"

I think that calls for a drink.

|9.30.08 @ 6:38PM|#

I think the more interesting dynamic is the absolute and total revolt that just happened.

Party leaders (Reid, Obama, Pelosi, Bush, McCain, Boehner) all tried to push this crap and enough* members from both parties said "Up Yours, Leadership."

* - More Rs than Ds did this, but still...awesome.

|9.30.08 @ 6:39PM|#

|9.30.08 @ 6:48PM|#

Hensarling's voting record is pretty good on fiscal issues. If he would only give up his support for neocon foreign policy "initiatives" and police state style law enforcement, he could be one of the next generation of limited government politicians to inherit the massive, growing, and well-organized support from the Ron Paul movement.

|9.30.08 @ 6:50PM|#

My Congressman, John Campbell (CA-48) voted for the Enron-style Wall Street bailout, despite admitting to the Associated Press that calls to his office were running 8 to 1 against the bailout.

So much for representative government.

|9.30.08 @ 7:10PM|#

I am happy to report that 3 out of 4 of my state's Reps voted nay (Moore-D from metro-KC voted Yea). NOW make fun of Kansas, cosmofuckers! Yee-ha!! ;-}

concerned observer|9.30.08 @ 7:12PM|#

|9.30.08 @ 7:13PM|#

"concerned observer" - I just said this to another poster on another thread, but conveniently it fits: you, too, are too stupid for words.

Congrats!

The Wine Commonsewer|9.30.08 @ 7:21PM|#

Yes it does.

|9.30.08 @ 7:23PM|#

@ concerned observer

HAHAHAHA you're funny. Worthless retirement accounts, you mean like social security, or a pension, right? I don't have a retirement account like that, I actually manage my own money. I cashed out the friday before the Lehman crash and then made a killing on gold, hahaha. Angry Optimist is right.

The Wine Commonsewer|9.30.08 @ 7:24PM|#

I've been trying to e-mail my Congress-person (Mary Bono (R), who voted *FOR* the bailout, by the way) for most of the day, but no luck. The House's e-mail server can't handle the load, and all I get is a "Sorry...try again later..."-type message. I'll keep trying until it gets through.

Howdy Neighbor, I faxed that Faxhead Calvert's office this morning early. DC and local. Kenny Calvert (one district over from Bono's-SW Riverside County) voted for the bailout as well. One of the five hardest votes he's faced since being in office. Shedding a tear, right here.

I'm sure the fax is connected to the shredder, but still....

I haven't written a letter to a Congressman in decades.

The Wine Commonsewer|9.30.08 @ 7:31PM|#

your all crowing over the collapse of the economy cause by deregulation andn the corporate leviathans that you libertarians place all your faith in, you deserve it when your retirement accounts are worthless because the market crashed.

Crowing? I don't think so. Faith in corporate leviathans? I don't think so.

I understand the concern about retirement account values, but you are screwed anyway. Necessary evil bailouts don't resolve the problem, they merely shift the costs to people who did not incur them.

The price of this folly will be paid, we just arguing over who should pay it. The people who caused it? Or the taxpayers?

|9.30.08 @ 7:48PM|#

The price of this folly will be paid, we just arguing over who should pay it. The people who caused it? Or the taxpayers?

Look, it's not that simple. It'd be great if it were, but it's not.

Economics isn't zero-sum. That's the entire point of why free markets are so compelling: they create wealth! And, unfortunately, sometimes they have gigantic crashes which destroy some of the wealth that they created.

It's at least possible that spreading the damage from this one out and into the future will mean that overall a lot less wealth is destroyed, and that we'll all be better off. I'm not saying I believe that is definitely the case: I'm ambivalent shading to negative about the bail-out, and anyway not really educated enough on the subject to have a lot of confidence in my opinions.

But it's not just like a bill that someone has to pay, and the only thing that we can do is shift that around. That's exactly the fallacious idea that leads to all these class warfare things that libertarians are against: that if someone gets rich, they must do it by making someone else poor. If we recognize that sometimes, when someone gets rich, they make everyone else a little richer, we can also recognize that it's at least conceivable that if we let the lenders get really poor, they'll make all of us poorer, too.

|9.30.08 @ 7:50PM|#

I'm sure the bailout will be pass, but "winning" the PR battle = opposing it vocally. Right or wrong, 75% of America is against it.

|9.30.08 @ 7:51PM|#

What the hell is "rock-ribbed"?

|9.30.08 @ 7:55PM|#

Concerned Observer

You're all crowing over the collapse of the economy, caused by deregulation and [by the] the corporate leviathans that you libertarians place all your faith in; you [will] deserve it when your retirement accounts are worthless, because the market crashed.

Probably shouldn't feed you but:

1.The current market turbulence is the result of gov't regulation and pressure to sell high-risk mortgages--it was gov't interference, not deregulation that has brought us to our current situation.

2.Libertarians faith is where it should be--in a free market--the greatest tool devised for enabling people to satisfy their needs, at the best price available.

3.Securities provide the surest and best return on an investment outside of real estate over the long term. My retirement funds will be fine.

4.Markets go up, markets go down, otherwise they wouldn't be markets.

I also fixed your "sentence"; you're welcome.

Heinrick|9.30.08 @ 8:01PM|#

Angry observer, actually those of us who work hard and live within our means see this as an oppertunity. I heard the DOW dropped 700 pionts yesterday and opend an Ameritrade account last night.

Kevin Peterson|9.30.08 @ 8:17PM|#

@Heinrick

Right on the ball. The only thing better than a clearance sale is a clearance sale on the stock market. Yep, I've lost a few thousand out of my 401k this year, but I'm 31 and will make it up in the long run.

If you had all your assets in equities and you were planning on retiring in the near future, I applaud your willingness to serve as a warning to others.

|9.30.08 @ 8:33PM|#

Heinrick,

Check your spelling when you make your first purchase.

I guess we're all buying the "poor people caused this" argument?

|9.30.08 @ 9:21PM|#

mantooth,

I'm sure you are just repeating what you've been told, but really, where do you get the idea that anyone is saying "poor people caused this"? It's pretty obvious that congress critters buying votes caused this by strongarming lenders into giving loans to those who had no chance to repay them, in the process artificially increasing the demand for housing and making it more expensive for everyone while at the same time causing the present difficulties.

|9.30.08 @ 9:50PM|#

I'm sorry, I'll have to get back to ya after I am told what to repeat.

Just was curious is all.

|9.30.08 @ 10:27PM|#

In this pitch black I can't see my invisible hand in front of my face.

Czar|9.30.08 @ 10:42PM|#

Poor people? Nah. I blame just about everyone over 40.

|9.30.08 @ 10:42PM|#

Is anyone interested in chipping in to run ads opposing incumbent Congressmen who vote for the bailout? Un-electing a few of these guys might be a good idea. If so, please contact me at constituentresponse@gmail.com.

CRT|9.30.08 @ 10:47PM|#

"The House's e-mail server can't handle the load..."

May or may not be true. Perhaps they're just tired of hearing from the constituents they plan to eventually ignore.

|9.30.08 @ 11:26PM|#

"It's at least possible that spreading the damage from this one out and into the future will mean that overall a lot less wealth is destroyed, and that we'll all be better off. I'm not saying I believe that is definitely the case: I'm ambivalent shading to negative about the bail-out, and anyway not really educated enough on the subject to have a lot of confidence in my opinions."

Michael, I admire your open mindedness about this, but I also think there are some things that need to be pointed out. First, the reason people think that this is a problem is that a world where financial institutions are failing is a world where people aren't able to make or receive loans. The bailout plan proposes to fix this by having the federal government take out a massive loan from the still solvent banks, mostly located outside of the United States, in order to overpay for bad assets. This would give US banks the financial shot in the arm necessary to allow lending to domestic households and businesses.

The problem with this is that in order to give this money to domestic banks, the Federal government has to compete with those banks and the individuals who would receive loans from those banks in the borrowing market, driving up interest rates at a given level of risk and generally making it harder for banks, companies and individuals to borrow. Much of this effect would be alleviated if the banks that received the windfall use the money for borrowers, but they can't lend out more money than the government borrowed to inject into them in the first place, so I don't really see how this would allow us to turn a big shock into a gradual comedown. I think we're so used to thinking of the government debt as something that comes from outer space that we forget that the government gets loans from the same places that we do.

Happy Jack|9.30.08 @ 11:43PM|#

The Republican Study Committee, a group of conservative House Republicans, wants the core of the bill to create a government insurance plan for shaky assets, with premiums paid by financial institutions

That sounds like going to GEICO after your fifth DUI wreck.

Paul|10.1.08 @ 12:21AM|#

So much for representative government.

The EU refers to the brushing aside of representative government 'statesmanship'.

The EU wants this bailout plan, because everyone on the planet discovered they're tethered to our economy. If there's anything that would make me want this bailout less than the EU being for it, I can't think of it.

Mike Laursen|10.1.08 @ 12:30AM|#

The bailout plan proposes to fix this by having the federal government take out a massive loan from the still solvent banks, mostly located outside of the United States, in order to overpay for bad assets.

How many restrictions are there on foreign banks and financial institutions making loans in the United States? (I'm just asking. I really don't know.) If there are significant restrictions, seems like a free market solution would be to allow them to do business here more easily.

Paul|10.1.08 @ 12:37AM|#

Economics isn't zero-sum. That's the entire point of why free markets are so compelling: they create wealth! And, unfortunately, sometimes they have gigantic crashes which destroy some of the wealth that they created.

And? Where, exactly-- where is it written that wealth can't be lost? Oh, right, we're in the "free market" where wealth can only be created and wealth losses are subsidized, erh, nationalized, er, socialized, erh-- what's that new term they're talking in DC-- OH YEAH! "Guaranteed".

It's at least possible that spreading the damage from this one out and into the future will mean that overall a lot less wealth is destroyed,

*trying not to laugh*

Spreading the damage doesn't lessen it, it just spreads it... to, you know, people who don't deserve it. *looks in mirror, then looks at daughter's picture* yeah, to those people. The loss of wealth should be concentrated to the people who, you know, lost it. Crazy. Craaaazy, I know. But I gotta be me.

I'm ambivalent shading to negative about the bail-out, and anyway not really educated enough on the subject to have a lot of confidence in my opinions.

Cool, so we're back in agreement-- the bailout is a Bad Idea(tm).

But it's not just like a bill that someone has to pay, and the only thing that we can do is shift that around.

And on this you and I agree. It's not a bill that someone has to pay. It's already been paid, by the people who bet more capital than they had. What the government bailout attempts to do (I wonder if Daniel Schorr still refers to this as a 'bailout' 'cause he sure was cynical about the Bear-Sterns bailout) is make it exactly like a bill that gets shifted around.

Y'see, if we let government do this bailout plan-- any bailout plan, no matter how many children, and fluffy bunnies they throw into the language, it becomes a bill that gets shifted around because someone doesn't want to pay. I wonder who that might be...

That's exactly the fallacious idea that leads to all these class warfare things that libertarians are against: that if someone gets rich, they must do it by making someone else poor.

Ohh! Oooh! We're back in agreement again. Why is it that when someone fails to get rich, or bets a really large amount of money, they get to put up their hands in that Vegas-like maneuver where the dealer walks away from the table-- and then tells me that they might become poor unless they get my help?

If we recognize that sometimes, when someone gets rich, they make everyone else a little richer, we can also recognize that it's at least conceivable that if we let the lenders get really poor, they'll make all of us poorer, too.

Of course there will be an economic slow-down. That's called a 'pressure relief valve' going off. That valve was put there for a reason. It's sort of like your water heater in your house. There's a popoff valve on that thing for a reason. If it starts to go off, it's generally considered a bad idea to plug it up because it's like so totally annoying and harshing your mellow. Any bailout plugs the popoff valve. Meaning we're in for something really big in the future.

|10.1.08 @ 1:13AM|#

Oh Jesus, did I really spend all of my free time writing multi-paragraph screeds in the comment sections of political websites?

Oh, wasted youth...

DJP|10.1.08 @ 3:27AM|#

Well, I read the multi-paragraph screeds and found them insightful.

I'm glad you did!

|10.1.08 @ 9:56AM|#

Seriously. Without the shrill bickering and name-calling with a dash of selective insights I find here I would hardly survive my day.

When the markets began to tank these past weeks I got excited for some bargain-hunting and the promise of a stronger dollar.

The looming bigger, badder, and better than ever bailout is such a killjoy. I blame old people and fearmongering. But mostly old fearmongerers.

""" Perhaps they're just tired of hearing from the constituents they plan to eventually ignore."""

ding, ding, ding, we have a winner.

I saw that Limbaugh was prasing the house republicans for voting against the bill. "Thank God for the house Republicans" he said. I wonder what he'll say when they cave in and sign the bill.

Citizen Nothing|10.1.08 @ 10:17AM|#

"I saw that Limbaugh was prasing the house republicans for voting against the bill."

Blind hog, meet acorn.

|10.1.08 @ 10:32AM|#

Both the Democrats and the Republicans are proposing new additions to the bill and making it clear what it would take to get them on board.

So, they've gone with the Christmas Tree approach. What's the phrase? Lipstick on a pig? That ain't gonna make it any more popular out in the hinterlands.

Of course, the fact that the core support for this comes from people whose seats aren't at risk means it will probably pass.

Reinforces my belief that right at the top of what this country needs is something it will never get - redistricting reform, probably in the form of a Constitutional requirement that Congressional districts be as compact as possible and based on existing political boundaries as much as possible. These "rotten boroughs" with Representatives for life are a cancer on the Republic.

|10.1.08 @ 10:33AM|#

I wonder what he'll say when they cave in and sign the bill.

He'll rip 'em a new one. Limbaugh hasn't toed the Republican party line on a lot of issues in the past few years. He's no McCain fan, that's for sure. He takes the eminently defensible position that McCain sucks, but Obama sucks harder.

|10.1.08 @ 12:27PM|#

"""He takes the eminently defensible position that McCain sucks, but Obama sucks harder."""

Of course, that allows him to back the party while looking like he's not backing the party. He's saying McCain is the better candidate, that's still an endorsement of sorts. Just not an outright endorsement becuase he doesn't want to give McCain one, but he wants to keep a republican in the Whitehouse. I'd bet that's who he pulls the lever for in November even if he's holding his nose. Isn't that what the republicans voting FOR the bailout are doing? Saying it's better than the alternative and voting for it holding their nose?

|10.1.08 @ 4:03PM|#

Isn't that what the republicans voting FOR the bailout are doing? Saying it's better than the alternative and voting for it holding their nose?

Maybe. I just find it interesting that the line between yes and no votes is the line between safe seats and contested seats. In other words, no one is willing to ante up anything to pass this bill. Apparently, the real underlying thought process is some combination of "I don't care if the country goes straight to hell as long as I hold my seat" and "I don't really believe there is a financial crisis of any scope."

The Wine Commonsewer|10.1.08 @ 4:26PM|#

It's at least possible that spreading the damage from this one out and into the future will mean that overall a lot less wealth is destroyed,

Actually, what Paul said covers all the bases nicely.

On a slightly different note, I didn't say economics was zero sum. Neither did I say there was was a bill to be paid. I said that the price for this folly will be paid and you cannot erase that by shifting the costs forward or outward at taxpayer expense.

The bailout proponents are asking people who pay the mortgage on time and who don't give a crap what your 401(k) is worth to help you out of a jam.

The rest of us are saying that the market will handle this and right got dam now. When the dust settles, we'll all move forward on a more even keel. If you can get the feds out of the mortgage business altogether, that's even better.

I'm taking my lumps now in the form of a 40% drop in the value of my home, less income from my business, lowered value in investments I happen to own, and the sure knowledge that at least three of my clients are going under in the next six months.

The bailout crowd wants me to also take on some bad mortgages. No. Not only no, fuck no.

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