Assorted musings as Washington grapples with the financial sector meltdown:
- It’s clear we have a major problem in the credit markets which requires a drastic response. Financial institutions are hoarding cash and don’t even want to lend to one another. How much time does Washington have to act? That’s a good question. I don’t know how close we are to an outright meltdown. My gut tells me that the White House has played the panic card as a negotiating tactic–to pressure Congress to pass Treasury’s proposal. I don’t believe the world will collapse if a bill isn’t hammered out this weekend.
That being said, something must be done soon. And the longer negotiations drag out, the greater the chance the bill will be bogged down with clutter. - This episode makes one thing clear: President Bush has little, if any, clout left on Capitol Hill. Remember after the 2004 election when he boasted of his supposed “political capital”? That’s now been downgraded to an illiquid asset, which the treasury may wish to repurchase at a bailout fire sale at $0.10 on the dollar.
Bush no longer has the support of members in his own party. Had this situation occurred two or three years ago, House Republicans would have fallen in line behind the plan. But with Bush on his way out the door with a 20 something percent approval rating, many of them are pursing their own agendas. - Senator Corker had a local radio interview this morning in which he said that there was a bailout deal worked out at 1 p.m. yesterday. At a minimum this agreement included Senate Democrats and Republicans and House Democrats. I’m not clear to what extent House Republicans were on-board. Then, during the White House meeting which was allegedly held to facilitate a bipartisan compromise, things blew apart. According to Corker, “presidential politics” was interjected and the deal disintegrated. He would not elaborate on what happened, but I don’t know how you can interpret the comment any other way than that it was directed at McCain. Senator Obama had no reason to blow up a deal the Democratic leadership had worked out. Rather it appears McCain sided with rebel House Republicans in throwing a wrench in negotiations.
- Thus far McCain has demonstrated no bipartisan leadership, which was the alleged reason he went to Washington to facilitate an agreement.
- This bill, though necessary, has virtually no popular support; it has no natural constituency, apart from the financial industry. Most people don’t understand the crisis, or even the potential fallout from it. There’s no external push for lawmakers to pass a bill. The legislation remains bogged down, it make take severe repercussions in the financial markets to get the process unclogged. Let’s hope things don’t come to that.