I tried over the weekend to do a more serious post with my analysis of the credit crisis and the bailouts, but basically there’s just no way for me to get into this further without running afoul of my day job. At this juncture, given the limits on what I can write, the best I can offer my readers on the whole Wall Street/bailout issue is a roundup of links and what I can see and hear going around the political side of things:
*Newt Gingrich, who is always worth reading even when he’s wrong (and when Newt is wrong, he’s often spectacularly wrong), has some very good questions about the big bailout, the $700 billion, no-strings-attached, no-oversight debit card being handed off to Treasury to create what blackhedd calls the First National Bad Bank of the United States. Blackhedd has his own questions and cautions about doing nothing here (more from McArdle on how close we came last week to a complete unraveling). I was on a call with McCain’s economic advisor Douglas Holtz-Eakin last week and from what I can tell, McCain appears to be pushing a solution that doesn’t involve Uncle Sam actually buying the underlying investments, although his proposal is likely to be moot once some version of Paulson’s plan gets passed into law. There’s no Obama proposal on the table to compare that to. Here is McCain today on the Paulson plan:
I think it is clear that Congress must act and must act quickly. I laid out my plan and my priorities last Friday. I spoke to Secretary Paulson over the weekend, and I’ve been looking at the plan the administration has put forth. I urge Congress to study this proposal carefully as they consider the remedy for this crisis.
As for me, I am greatly concerned that the plan gives a single individual the unprecedented power to spend $1 trillion – trillion – dollars without any meaningful accountability. Never before in the history of our nation has so much power and money been concentrated in the hands of one person. This arrangement makes me deeply uncomfortable. When we are talking about a trillion dollars of taxpayer money “trust me” just isn’t good enough.
We will not solve a problem caused by poor oversight with a plan that has no oversight. Part of the reason we are facing this crisis is an antiquated regulatory system of uncoordinated agencies that haven’t been doing the job.
I believe we need a high level oversight board to impose accountability and establish concrete criteria for who gets help and who does not. They must ensure that throughout this crisis, the government is a careful steward of the taxpayer’s dollars. The oversight board should be bipartisan and have qualified citizens who have no agenda but the protection of taxpayers and the financial markets. People like: Warren Buffet, who supports my opponent, Governor Romney, who supports me, or Mayor Bloomberg, an independent.
*From a political perspective, Ruffini thinks Hill Republicans should take a hard line against the $700 billion bailout. The word I’m hearing is that the deal is being negotiated mainly between the Administration and House Democrats, and the GOP on the Hill is playing wait and see depending on what emerges, especially on the crucial issue of how much stuff the Democrats try to tack on. The 28% approval rating for the $700 billion bailout is not encouraging to anybody on the Hill who is contemplating supporting it.
*Kevin Hasset of AEI offers a good nutshell summary of the view, increasingly popular on the Right, of how Senate Democrats fed the flames by defeating a McCain-sponsored reform in 2005. McCain goes hard after Obama on the same line of reasoning. The Obama camp’s counter-effort against Rick Davis is not much of a response, given that nobody can finish the sentence of “and that’s why McCain….”
*Maguire is skeptical of efforts to blame mark-to-market accounting. Which side of that debate you are on depends on whether you think the current market prices are realistic, or whether they represent a 1-2 punch of illiquidity and irrational panic. If the latter, it makes more sense to suspend or ditch mark-to-market. Reasonable minds can and do differ on this. Relatedly, whether the underlying redemption value of the debt securities at issue is or isn’t greater than current market value will go a long way to determine whether that $700 billion outlay by the Treasury actually ends up turning a profit, which is far from inconceivable.
*NR on Gramm-Leach-Bliley, including Ramesh’s question about whether the bill’s critics actually want to repeal any particular provisions thereof. More here in the same vein from Megan McArdle.
*Of course, whenever you feel good about McCain, he goes and does something like recommend Andrew Cuomo for SEC Chair. There are more than a few reasons why McCain could scarcely have chosen a worse example for his bipartisanship shtick.
As I noted last week, the good things about McCain in a situation like this are that he’s not prone to panic or freeze up in a crisis and that, having faith in the American economic system, he’s likely to choose less draconian and counterproductive solutions in the long run than Obama. Nobody saw the whole current crisis coming, but as noted above McCain does get some credit for foreseeing and trying to head off parts of the problem. The bad news is stuff like this Cuomo nonsense, which I think he does just to butter up the mainstream Beltway press. Unfortunately, the current political climate makes it impossible for anybody who truly understands the problem to get elected, but other than Reagan I’m not sure we’ve had a president in modern times who really understood the economy, and the high-finance stuff was over Reagan’s head too. The core advantage McCain has over Obama is that there are, in Reagan’s memorable phrase, fewer things McCain knows that are not true.
*Obama’s answer to the collapse of the housing market: “rebuild” one of the nation’s fastest-growing cities!
*Now this, this is calm, mature governance, I tell ya.
UPDATE: The Blogometer rounds up blog reactions to the bailout, which represents the death of the free market, of fiscal conservatism, and/or of liberalism, depending who you listen to. The Club For Growth lines up against it.