There is an American folktale (with various versions) of Thomas Jefferson asking George Washington why he agreed to two chambers of Congress. Washington asked, “Why do you pour your coffee into your saucer?” Jefferson replies, “To cool it.” “Even so,” Washington said, “we pour legislation into the senatorial saucer to cool it.”
There are numerous problems with this folktale. First, it is doubtful that quiet Jefferson would have such a conversation with Washington. Did either of them drink coffee in such a fashion? But even if true, modern times has shown the saucer folktale to actually be reverse. When Washington and the Senate, hot and bubbling to pass something, it gets cooled off in the House of Representatives. The defeat of the Bail-Out Bill is unusual because the majority party wanted it (and had the votes to get it) and the President wanted it as well. Very rare does such a thing occur. What appears to have happened is that many in the House voted no due to re-election fears… which means the representatives must be getting an earful from their constituents.
Earlier yesterday, the headlines in Obsolete Media (i.e. newspapers) were quite interesting. The headlines screamed: “Bailout Bill Fails: Market Plunges 700 points!” What is interesting is that the drop in the market was mostly before the bill was defeated. More interesting is how the market went up around 400 points the next day. When we heard Economic Armageddon was right around the corner, that action had to be taken *now* or the sky would fall, the opposite occurred. If Economic Armegeddon was occuring, why did Congress take a couple of days off?
It was always the belief that if poorer people had homes, they would focus on improving their property as the Middle Class did and there wouldn’t be as much urban crime. This is what Congress justified in pressuring banks to give loans to people who could not afford them as I was told by a real estate investor many years ago. Fannie Mae and Freddie Mac also seemed to have a life of their own as they kept purchasing more and more ‘assets’. ‘Assets’, in how these people mean them, would be loans that would later bring them money. Since these people cannot pay them back (and never should have been given loans in the first place), the banks say their ‘assets’ are in trouble. Even worse, it appears Congress pressured foreign banks to invest in such mortgages as well. There was never a problem so long as real estate values kept going up. But water doesn’t go uphill forever…
The public is 300 to 1 against such bail outs. I have never seen Congress go against such strong public sentiment. So why are they doing this? It is probably the same reason why there is no ‘investigation’. There is no investigation because it would find Congress guilty (and Congress will never point to itself as a problem). It is likely Congress feels that since they were the ones that pressured banks, even foreign banks, into these mortgages, then it is up to them to bail them out. The bail out currently in the Senate is more about foreign banks. When Americans realized that much of this money was going to foreign banks, the phones melted down in the senators’ offices (people are already opposed to bail outs to American banks let alone foreign ones). While its true that banks made bad loans, it is also true that a bank is not going to get away with saying ‘no’ to Congress. As for the President wanting it, no Administration wants to become seen as a ‘Hoover’. With the last few months in office, no administration wants to end on such a note.
This is more political than economic. Grand crisis about Economic Armegeddon weeks before a presidential election is rarely coincidental.
When the stock market plunged so much, of the 499 companies that declined, the company not affected was Campbell’s Soup! There is a story on this and an entertaining video on the page as well. It appears this ‘meltdown’ is like the dot com meltdown of 2000 with the exception that Congress and banks were participating in it.
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