Posted by
On the Right on Saturday, September 27, 2008 4:43:48 PM
Too many ornaments on the left’s Christmas tree, with the star on top being Chris Dodd’s preposterous proposal to make sure ACORN gets a cut of the income from each distressed asset sold at a profit even if distressed assets in the aggregate are sold at a loss.
They’ve got a little more than 24 hours to pass a bill before the
markets in Asia open Monday; Roy Blunt thinks if they don’t have it
done by then, there won’t be a deal until late next week. Any problem
with that? Read Bill Kristol’s latest
at the Standard and have a paper bag handy, as you’ll need it to
breathe. Publicly, at least, Fortis denies it’s at risk of going under
and claims it has liquidity to spare.
Kristol claims two sources who say otherwise and foresees bank runs in
the U.S. from the shockwave if it happens — bailout or no bailout.
(Roughly half of all Belgian households have accounts with Fortis,
according to Reuters.)
We’ve reached the point where even the Journal is sufficiently worried to beg for relief:
No one tried harder than we did to avoid arriving at
this pass, but now that we’re here our vote is that this government
intervention is justified to defend the system…
The libertarian blogs are full of tut-tutting that the economy has
held up surprisingly well, and for a year we’ve been arguing the same
thing. But there’s no guarantee this will continue, especially as
unemployment climbs and as evidence grows that banking distress is
squeezing credit to small and big business alike. Credit spreads over
Treasurys are back at agonizing levels, as investors and lenders flee
from even plain vanilla risks.
Nobel economics laureate Gary Becker is no alarmist, but this week
he wrote on his blog, “I have reluctantly concluded that substantial
intervention was justified to avoid a major short-term collapse of the
financial system that could push the world economy in a major
depression.” Anyone who thinks that capitalism will fare better after a
crash should recall that the 1930s didn’t end politically until 1980…
The Paulson idea also seems better than the “insurance” plan for
bank assets that House Republicans are now proposing. That idea would
still put taxpayers at risk if the assets fall in value, but with
little potential upside. Meanwhile, the assets would remain on bank
books, making it that much harder for banks to raise private capital
and resume normal lending.
The House GOP intervention may still be fortuitous if it focuses on
killing the many Democratic ideas that are making the Paulson plan
worse.
Indeed, which raises the question of why Dodd et al. are demanding
handouts to ACORN when there’s a developing national emergency to deal
with. As I’m writing this, Bloomberg
is hitting the wires with a report that progress has been made on a
deal and that Reid and McConnell are optimistic it’ll be struck
tomorrow, with Bob Corker quoted as saying House GOP resistance is
“thawing.” Let’s hope. If you follow only one link here, make it this AP history of recent government bailouts
in Sweden and Japan explaining why even well-managed recoveries mean
multiyear downturns. We’re in for a bad stretch, even if it’s not —
knock wood — a catastrophic one.
Update: I’m not much in the mood for blame right now but
people are sending this around and it’s as good a post as any to update
with. Barney Frank has a star turn, as usual.
Update: Pelosi wants something to look at by tonight.
I honestly wonder what the public reaction’s going to be if they stay
deadlocked, the market drops 2,000 points on Monday, and people start
running on banks. Confidence in government will be even lower than
confidence in the markets, which means political destabilization. But
what will that look like?