Tonight we've been presented with the Emergency Economic Stabilization Act of 2008 (EESA). Respectable pundits seem to be saying Congress should approve it.
It seems to be a case where we'll surely regret approving it, but where we would probably regret not approving it more. (If it passes tomorrow, we'll obviously never know.)
The vote to approve it is likely to be close, especially in the House, and could be something like about 2/3 of Democrats joining about 1/3 of Republicans to secure passage by a hair.
This will then enable Republican Congressional candidates across the country to run against the bailout and pretend to be principled.
Its infuriating that the GOP can even entertain this strategy. For, having created this mess in the first place, they should be paying a massive political cost in this election.
We have not done a good job at connecting the dots for voters on why this mess was entirely a creation of Republicans and their K Street armies.
As we think about how to tell this story better in the weeks ahead, I just wanted to draw attention to the real origins. (Please join below)
I have read a lot of comments suggesting that the repeal of Glass-Steagal is what caused all this trouble. While it may have contributed to it (say, by allowing the agglomeration of more institutions "too big to fail"), the real origin of this disaster is the Commodity Futures Modernization Act of 2000.
Allow me to draw your attention to a key point of Devilstower's brilliant entry on the Meltdown a few days back, talking specifically about this bill:
Gramm wasn't done. The next year he was back with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.
As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm. Not coincidentally, Senator Gramm, the second largest recipient of campaign contributions from Enron, was also key to legislating the deregulation of California's energy commodity trading.
This bill expanded the range of instruments and derivatives that could be created and traded, and expanded the sets of institutions that could engage in these risky transactions.
To connect the dots even more clearly: this bill specifically loosened regulation of credit default swaps.
Now you may have read things like "Well, Democrats voted for this, too..." or "Bill Clinton signed it into law..."
But the truth is that the bill that passed was never even debated in the House of Representatives, and was never even debated in the Senate. It was a poster child for the frequent tactic of the Republican majority at the time of attaching odious legislation - that had never been approved by either chamber - on to major bills in the dead of night.
Here's what was in that bill - which was passed a few days after the Supreme Court screwed the country by handing W the Presidency, and a few days before Christmas, and the millenial celebrations back in 2000:
H.R. 4577 was an appropriations/budget bill encompassing the funding for the Departments of Labor, Health and Human Services, and Education for fiscal year 2001 which had already begun in Sept., 2000.[9] This budget bill included:
- H.R. 5656 - Labor HHS Education Appropriations;
- H.R. 5657 - Legislative Branch Appropriations;
- H.R. 5658 - Treasury Appropriations;
- H.R. 5666 - Miscellaneous Appropriations - except section 123 relating to the enactment of H.R. 4904;
5. H.R. 5660 - Commodity Futures Modernization;
- H.R. 5661 - Medicare, Medicaid and SCHIP Benefits Improvement and Protection;
- H.R. 5662 - Community Renewal Tax Relief and Medical Savings Accounts;
- H.R. 5663 - New Markets Venture Capital Program; and
- H.R. 5667 - Small Business Reauthorization.
Democrats did not voluntarily vote for this virus that has now thoroughly infected the financial system. They voted for a huge appropriation bill that contained this virus, without fully realizing what the risks would be - and after the exhausting trauma of the Clinton impeachment fiasco, the 2000 election campaign, and the stealing of the presidential election. They figured that if they didn't vote, a new bill would have to be passed a few weeks later that was likely to be even worse.
So have no doubt, whatsoever: this current debacle is entirely the fault of Republicans ramming their extremist ideology down our throats, and carrying oceans of water for financial industry lobbyists.
Say it loud and with conviction for (as usual) the facts of the matter are on our side. Per Stephen Colbert, reality has a distinct Democratic bias.
Congress may get forced into a vote tomorrow, but we'll be talking about this for the next 5 weeks, and there is little doubt that the meltdown is the issue on which the scale of Republican defeat will hinge.
If there is any justice out of this meltdown, Democrats will not be fighting for the 60th Senate seat in 5 weeks.
We'll be fighting for the 70th.