Sep. 29, 2008 - The wild ride ain't over yet

Congress rejects the bailout

We woke this morning to learn another bank has fallen.  Wachovia, has been bought by Citigroup.  As I write this, it's being reported that Congress voted down the Emergency Economic Stabilization Act of 2008.  It seems that the members of Congress don't see this as much of an emergency as the media told us over the last ten days.  House Speaker, Pelosi will take the heat for the comment, "We sent a message to Wall Street - the party is over."  I do believe, that comment was disingenuous or stupid, at best; setting-up this bill up for failure. 

Why? Well, many Americans wanted a pound of flesh for excessive executive compensation for poor corporate performance and this bill falled to address that head-on.  Under the proposed plan, current CEO's with valid contracts would not even be affected by the new law, had it passed.  Homeowners felt left out of the cleansing of bad loans. Not only has Wall Street been spining out of control, so have American household bugets.  A successful bailout must address both. In reaction to the public's outcry congress, republicans and dems alike, voted to save their congressional seats and partisan politics raised it's ugly head...again. 

So, now what?  Will we see the world stop turning, as promised by President Bush, Secretary Paulson, Chairman Bernanke and the leaders of Congress because this deal wan't quickly done?  I seriously doubt it. Congress and the president's advisors will be forced to go back to work and draft a plan that is more acceptable to middle-class America.

But, in the meantime, I suspect that the FDIC will foster more mergers, the stock market will drop, mortgage rates will continue to rise and credit will tighten for prospective homeowners. The political blame game will go on, as usual.

On a positive note: with the threat of a larger recession, one benefit we could see is a drop in oil prices.  Maybe, just maybe, Americans have moved-on from the motivation of the politics of fear.  Every incumbent should be very afraid on election day.