Bail Mary

The “historic,” “massive”… pick whatever adjective you want… to describe the over $850 billion “financial bailout” package safely passed the House of Representatives and the President signed it almost immediately. As it is, on high job loss numbers and other economic fears, the stock markets declined (the Dow down around 150 points).
For good measure, it seems, Californians who have long believed in the Tax Cut Fairy now get their appropriate comeuppance as Gov. Schwarzennegger prepares to ask the Fed for $7 billion in loans to keep the Golden State operating. Deep sighs.
Meanwhile, noted NYU economist Nouriel Roubini notes that as dramatic and ever-growing as the government’s latest interventions are, they are showing diminishing returns (BTW… one must understand the insane scope of these numbers, to wit, our entire GDP– all output from our economy for a year— is around $14 trillion, and the entire planet’s GDP is around $65 trillion), and hence, more dramatic actions, such as unlimited FDIC insurance on deposits and triage of banks into those that can be saved and those that will be consigned to just fail, must be considered.
And so… here we are. We have just committed to increase our national debt (on which we will pay interest… forever) by around 7-8% overnight, with no assurance that taxpayers will not take a bath on all of it and no assurance that it will even stop a seemingly ongoing financial meltdown.
The two questions to be asked are short term and long term. The shorter term question is whether the current government of President George W. Bush is capable of taking the necessarily competent interventions required to properly invest the taxpayer’s money on offer (i.e. limit their preferred ideology of kleptomania, and buy bad loans and equity and invest and intervene where needed systemically, rather than doing only what will benefit their friends and insiders… i.e., the exact opposite of how they have handled Iraq and everything else that has been entrusted to them). The longer term question is that, assuming that whatever the short term interventions are, that they stabilize things for the next four months or so until this gets handed over to President Obama (or President McCain, though that is looking less likely by the day, particularly as enough of the electorate realizes that complex problems like global financial collapse is probably not best dealt with by “aw shucks’ing” with a pretty smile and wink)… will the appropriate regulatory reforms necessary to unwind the current crisis and prevent ongoing imbalance and crisis be put in place, including but not limited to restoration of New Deal systemic brakes, including but not limited to restoration of actual progressive taxation to ensure that those who have caused and profited from the current financial nightmare pay their fair share toward cleaning up the mess they made and profited from. And the time to ask these questions is now, while we’re only still at the “early” stages of complete and total panic.
So much to do… so little time. So much faith must now be placed in people who have failed to plan for what was becoming clearer to everyone, to wit, the system was melting down. (If nothing else, the Bear Stearns collapse last May should have been the wake-up call that dramatic contingency plans were required.) Instead… here we are… again. Another major crisis that the Bush Administration not only failed to protect us from, but its narrow ideology made far, far worse. And yet… that’s whose hands are on the wheel, at least until late January.
Well… maybe we’ll make it through.