Recovering from today's disgrace
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/09/29/art.capital.dark.ap.jpg caption="The Federal Bailout plan did not pass through Congress."]David Gergen | Bio
AC360° Contributor
CNN Senior Political Analyst
The financial markets have sent a clear signal of just how reckless the House of Representatives was today in rejecting the compromise bailout plan - no less than $1.2 trillion in stock values were wiped out in just a few hours.
What can be done to get a bill through in the next few days? Here are some initial thoughts:
First, a ton of bricks needs to be dumped on the heads of those who voted against - if they can't see the light, make them feel the heat. Democrats ought to be ashamed that 95 of their Members voted against; but it is the House Republicans who deserve the greatest blame - a significant majority of Democrats voted in favor of the bill, while conservative Republicans - defying the White House - voted against by over 2-1. I hear that some in the White House think the GOP vote was a disgrace; they are right.
Second, Nancy Pelosi has to remove the sting she created through her speech on the House floor. Republicans now blame her for the defeat, arguing that she was so partisan that some of their "yes" votes flipped and voted no. She may think this charge is unfair but since so much is at stake, she needs to go overboard to clear the air.
Third, the White House and Congressional leaders should count heads to make sure that everyone who voted "yes" today will do so again in a second vote. If the 228-205 margin holds, that means they have to flip at least 12 Members for a second vote. It will be much more difficult to get all of the switches from the Republicans. Solution: put in enough sweeteners so that each side has a bit more and get an agreement between Nancy Pelosi and John Boehner: "I will deliver 6 from my side if you deliver 6 from yours."
Fourth, Hank Paulson must take another look at the idea at the idea of bankruptcy courts being able to review and help to rewrite private mortgages. How many Democrats would come over to "yes" if that were done? And what can he do to sweeten the pot for at least a half dozen Republicans?
Fifth, Barack Obama and John McCain should now join up with President Bush and the Congressional leadership to give this bill a much more vigorous push. After his ill-fated intervention of last week, McCain turned surly today, blasting Obama - unfairly - for the defeat in the House. That is ridiculous. But it is true that Obama could be a lot more forceful than he has been in working behind the scenes to round up votes. Both men need to show much more leadership here. President Bush obviously has so little clout that he can't get this done. Obama and McCain should step up to help him - and good grief, avoid trying to claim credit or elbowing the other guy in the eye.
This is big time stuff. Washington isn't playing with matches here; it is playing with dynamite. For the sake of the country - and for our standing as a world power - we need LEADERSHIP!
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Filed under: Bailout Turmoil • Barack Obama • Economy • John McCain • Raw Politics |
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The volatility in the market is not suprising that it has been propped up for over a week now expecting a reprieve that the bailout represents. This bailout is a case study in what is wrong with Washington. Who needs the big money that the big banks and investment firms on wall street loan out? Big corporations. Most of the hometown smaller banks did not get into the subprime business to fuel quick profits for the big firm's highly speculative derivatives. Those banks are still lending as before, and that part of our economy is doing fine. But the small banks don't have enough to loan out to the big boys whose greed blinded them to common sense and got them into trouble. Well I have news, the big corporations have enough resources to survive the credit crunch. Sure they will have to divert capital from future expansion projects to payroll expenditures and may have to layoff some workers to make ends meet, but they are not going under. Jobs will be lost for sure and a recession is inevitable for a few years, but it is not like this kind of thing has not happened before as Paulson et al would have you believe. This bailout will very likely merely be a stop-gap for a few months as the 800 pound gorilla in the room that is driving the whole mess is falling housing value, and that is not nearly over. The treasury will burn off all of the reserve saving the worst offenders now when in the end both they and more reputable firms will go under when there is not enough treasury reserve to save anyone later. Paulson and Barnacke are willing to nationalize (socialize) our free markets in order to save a handful of greedy firms now. They are putting the interests of big corporations and especially wall street firms over the interests of the rest of the economy and the people. Privatizing profits and socializing debt should never be an acceptable solution for any leader who claims to represent the interests of the people of the United States. As I alluded to above, this case study shows you who is pulling the strings of our leaders and truly running our country.
David,
Let's look at the facts. We are at the end of a 12 year real estate bubble. Some fault lies with each party, but all were willing to stay on the ride while eveybody made money. People with NO credit got loans. No money – no problem. You qualified for a no doc. 103% loan. C'mon, everybody was doing it. Real estate was a no lose investment. And along the way, wall street CEOs laughed all the way to the bank. OOPS, somebody asked to see the collateral underlying the new and magical financial vehicles Harvard business grads were dreaming up every day. Guess what – for every dollar taken in, wall street spun it as ten dollars. Like all business cycles built on greed, this one would eventually collapse. Unfortunately, it may take 3 to 10 years for housing to turn around. Those who voted NO today should be congratulated. This bail out (sorry, Invest in America) primarily benefits wall street risk takers who call it "creative destruction" when it happens to any other industry. (You've got love how wall street has a name for eveything.) Sure, this will be a rough period for America as the world contracts, but eventually the pendulum will swing back in the positive direction. All this bail out would do is postpone the inevitable. The sooner we get past the recession, the sooner the recovery can start. Let's not make make wall street's elite even richer in the process.
Possibly Sara Palin could have interjected some whit and humor into the discussion on capital hill today and made a difference. She seems to be good about talking down to people and making what she thinks are humerous comments about the situation or topic to make it appear she is smart and whitty.
We need a SMART VICE PRESIDENT not a smart ass for a Vice President.
Mr Gergen,
Do you remember in Its a Wonderful Life, when Jimmy Stewart lost all that money and the people in the town whom he helped over the years supported him in his time of need, this feels like that now, but with some seriously big differences.
In the story Jimmy Stewart's uncle lost the money because Lionel Barrymore's character frauded him out of it. But because of how Jimmy Stewart treated the townfolk especially using his honeymoon money to stop the bankrun he earned their respect. When he needed help everyone was there to help him.
But it is so different now, Wall Street millionaire CEO's, the banks and credit card companies, Paulson and his buddies are like Lionel Barrymore's character Potter. They just want to fraud us out of a future.
If the banks and the government would have treated us like George Bailey for the last few years we would fall over ourselves to help. That is our nature as Americans.
Everyone in Congress should stop acting like children, keep their egos at bay, think about what they’re doing to the country, and get this thing passed. Is this what America has become? A nation with adults who can’t compromise and get things done because immaturity precludes them from doing so? In that case, we have a lot of growing up to do.
Lilibeth
Edmonds, Washington
Your wrong David the rejection was a blessing and america has spoken
I don't understand why you don.t just list the names of which reps voted which way. Who's keeping them honest?
What I'd like to know is where was the bank examiners years ago when all these loans were being made; where were the bank boards who didn't question these loans; where was the Treasury Secretary and the Bush Administration's checks and balances as to where our money was being loaned out. Due to their neglience, the hard-earned money I scrimped and saved for my retirement is now "blowin' in the wind" and now I don't have a job to start saving for my retirement again...I feel Congress acted irresponsibily because the majority of their constituents didn't understand the problem and they were AFRAID of losing their positions in Congress and that puts them eye to eye with the same problem Herbert Hoover had in 1929. Now, instead of hearing about the "great depression" we all will be LIVING IT ALL OVER AGAIN!
While I'm a firm believer in punishment, retribution and blame, I'm also fond of getting a regular paycheck and preserving some value in my 401K. Both of those things will be in serious jeapordy soon.
We can't fix this by shouting that "their" end of the boat is sinking. Many companies that need credit for working capital are already close to sinking. That includes GM and your local 25 person manufacturer. Unless some confidence building legislation is passed within days, the companies that employ us all and comprise the value in our 401Ks will begin to vaporize.
The bill needs to be reintroduced and passed.
Again, the problem is NOT that banks are failing. The problem is that banks are not LENDING. If a bank fails, another bank just picks up the other banks assets on the "cheap." If the other bank is terrified of financial assets in general, no investment occurs and they hoard cash to protect themselves. Meanwhile, the thousands of NON BANKING BUSINESSES that depend on those operating lines of credit can no longer operate. Jobs are lost. More people file for bankruptcy. The cycle repeats.
This bailout is NOT about equity or any sort of moral sense of justice. If you want that, compel the courts to seize the assets of businesses that acted in an irresponsible and unscrupulous manner. It would be anti-capitalist beyond belief, but that would be justice. The bailout is about calming the economy, not some crazy venue for vendetta.
Recapture losses.
Start shareholder class action lawsuits against CEOs and all those involved in the lies covering up all the losses.
I happen to agree with Roland Martin on this. The reason the American people are against this bailout is because they haven't got a clue as to what it entails. On top of that, this is what happens when an American President loses his credibility with the electorate. I am for this bailout, bad as it is, because, as a retiree, I am fully aware that when everything starts hitting the fan, the FIRST people it is going to hurt is the middle, and lower classes of this country. Once that starts happening, the voices will be rising, and rising rapidly, but so much damage will have already been done. And the next Bill these guys vote on may not be as good as this one was. A President with no credibility, and an electorate poorly informed= disaster.
A financial system is built on faith and confidence. Without it, money will not flow. It is just that simple. Emotions and self-interest will not solve the problem. Today, we are not talking about the weapons of mass destruction, but rather the potential collapse of our financial system. The ripple effect of a sever credit crunch in our financial system can be devastating to the nation. Let's solve the short-term emergency and then work on the long-term soloutions, that is, how to curb the charge-to-a-credit-card mentality at the consumer and government levels.
Democrats control both the House and Senate. The Democrats need to write the Bill and pass it without Republican input. It's obvious that there can't be any bipartisanship.