Why the Bailout Died in the House


What a strange and wonderful narrative that's coming out of the failure of the bailout bill in the House o' Reps yesterday:

Ms. Pelosi delivered the Democratic votes she had promised, but could not muster enough of them to avert a defeat that could long be remembered.

More here, from The New York Times.

Now, we "know" why the Republicans pissed on the bill (well, by a 2-to-1 margin, meaning 65 GOPpers voted for the bailout): Speaker Nancy Pelosi (D-Calif.) gave a rankly partisan speech that dried House Minority Leader John Boehner's teary eyes and steeled the will of the free-market ideologues to vote against a bill they know is bad for all sorts of reasons (more on that in a second).

But why didn't the Dems, who hold a freaking majority in the House, not pass the bill on a party-line vote? Did you get that above about the Dems? Pelosi delivered the votes, but just not enough of them. WTF? That's like a line from Pravda.

Actually, according to the morning yak shows, she gave passes to tons of congressfolks in "tough" re-election fights, and to various other folks who didn't like the bill.

In any case, here are two non-ideological reasons why it's great that this bailout went down the tubes faster than you can say "Bearstearnswachoviaaig":

1. This thing was The PATRIOT Act of the financial world. That is, it's a bill designed to address an enormously complicated situation that will have incredibly far-reaching implications probably for decades. Warren Buffet and others have invoked Pearl Harbor to conjure up the need for speed when it comes to the bailout. But this isn't war. Or terrorism. Or even a depression. We've got time to work through the details, which are all that matter. There isn't any need to pass virtually any bill in seven days, or even seven weeks, or even seven months. Especially important ones. That's one (of many) lessons of The PATRIOT Act experience.

2. This thing is gigantically unpopular with the American people. Polls show large majorities against the bailout, which suggests that, at the very least, the Hank Paulsons, George Bushes, Barney Franks, and Nancy Pelosis of the world have done a real crap job of selling the bill to people. At least since federal soldiers illegally kicked the Cherokees out of the Southeast, the government has had a credibility gap wider bigger than Lyndon Johnson's earlobes. That trend has, er, only accelerated under President Bush for reasons that don't need to be rehearsed here. And Pelosi, remember, came into office saying the Dems were going to be the party of fiscal responsibility—and then larded up a farm bill with more lard than a Golden Corral parking lot. This bailout came with a "Trust Us" sticker on it. And no one is willing to trust the government (a good thing, actually).

If you believe in, coff coff, "Free Minds and Free Markets," there are plenty of other reasons to be glad that any bailout effort tanked. Most of which are rooted not simply in anti-interventionist ideology but in pragmatic concerns over the ways that rules work and how institutions are governed. You can read about them by scrolling through the past week's, month's, and (40) year's worth of economics coverage in reason. So there's no need to go in to them right here. But if you want to, start here.