I've largely stayed away from the blogosphere's analysis of the bailout package fashioned by Congress because I feel that there is way too much antipathy towards Wall Street. Aside from working at one of the banks that worked at the credit crisis, I simply think that a great many of you want to see Wall Street collapse, no matter the cost - even if it means that the fallout is going to affect each and every one of you in a meaningful, material fashion.
As I wrote in an earlier diary, Wall Street needs to be punished. Sure enough, the bailout package voted on today had some necessary features in it - limits on executive pay, the ability to take an equity stake in firms that participated, congressional discretion over half of the proposed funding - that made it resemble much more the package put forth by Chris Dodd and Barney Frank than it did Hank Paulson's.
But in one fell swoop, all of that was brought down. And if you think things are going to get better soon, think again.
Nancy Pelosi and the House leadership shouldn't have brought this to a vote unless they absolutely knew that it was going to pass. Virtually the entire trading floor on which I sit was watching the roll call on C-Span when it happened, and as soon as the vote began going against the package, the markets gapped like has never happened before in history. Not only are the fundamentals of the economy extremely weak, but there is a striking lack of confidence. Aside from helping relieve banks of bad assets on their balance sheets, the move would have helped to restore confidence in the financial sector. On a day when Wachovia was taken over by Citigroup (a shotgun marriage from hell, if there was ever one), a large British bank (Branford & Bingley) was nationalized, when a gigantic European bank (Fortis) had to be extended credit from multiple governments - there is evidence that America's financial problems are spreading overseas. And today's failure to pass the package absolutely killed any belief that something will get done. All of us were shellshocked as the day wore on, and the market's complete collapse at the close today was indicative of where people think the economy is headed: down, with no end in sight.
People at work were still hopeful that something will get worked out. But let's be realistic: with the general election drawing ever closer, and with the conservative wing of the House Republican caucus effectively holding everyone hostage, nothing good is going to get passed. They won the day, and they are in a much stronger position to get their watered-down, complete horseshit of a bill considered seriously. I know progressives may think this is an opportunity to pass a bill laden with their legislative hopes and dreams in it, but I don't really give a damn about that - it's basically a way to capitalize on Wall Street's pain. Something needs to be done quickly - and in a smart way. Those of us who work here can only hope that something is put back together in a good fashion that accomplishes what needs to be done.
Let me end on this note: this isn't just a Wall Street bailout. If nothing happens, you could see the collapse of the entire financial structure as it exists today. And if you value being able to borrow money to buy a home or a car or using a credit card or even getting paid for your job, you had damn well hope that something happens. With interest rates on borrowing soaring upwards as banks refuse to lend to anyone else, you could see a contraction of credit on a magnitude that has never been seen before. And that will bring the economy to a screeching halt quicker than you can imagine. Don't forget the people who work on Wall Street, either - a lot of us are not fabulously rich or enjoy ridiculously opulent lifestyles. The vast majority of the people who work at banks are good people who had nothing to do with what happened to bring about the current crisis.
Congress had a chance to do the right - not perfect, but right - thing today, and they screwed it up. Hopefully they won't regret that decision too much...because the consequences could be very, very ugly.