Look, I'm an anarcho-socialist by orientation, but in a know thy enemy mode I also work to understand our current institutions. Here's why I support the bill that failed yesterday in the House...:
Ever since we went off the Gold Standard in 1973, the economy has become an ever-more-vast spiderweb of interlocking pieces. The relevant one here is the role played by credit. Briefly...
One upon a time, you paid pretty much full price cash-on-the-barrel-head for anything you wanted to buy. Consumer credit changed that, so that people could make small down payments and pay gradually over time at an acceptable rate of interest. Businesses bought from other businesses on the same basis for large capital purchases like printing machines. Gradually, the universe of credit expanded. On the consumer side, this meant credit cards, bank lines of credit, home equity loans and other forms of secured credit lending and eventually unsecured credit. On the business side, 30 and 60 day payment terms on bills essentially allowed businesses to "buy" things (like inventory) for which they couldn't pay until they sold enough units -- but gradually escalated to the point that many companies do all large transactions on short-term credit (freeing their cash to make more than they pay interest) on things as basic as rent and payroll.
On the other front, original issuers of mortgages such as community banks, sell their mortgages to Fannie Mae (and some other investors), which frees up additional lending capital within the community banks for more mortgages. Fannie Mae (and other mortgage buyers) end up packaging loans into securities and selling them on the open market, where they are bought by large institutional investors. Then the foreclosure rates rise, and no one knows exactly or even roughly the value of the various mortgage-backed securities that they hold.
So, here we are, large institutional lenders have these "toxic" mortgage-backed securities which are valued at cents on the dollar but no one has any idea whether it's 90 cents or 15 cents. This just happened within the past thirty days, though any idiot who looked could see it coming. (None of the idiots in the regulatory agencies were looking, nor in the relevant committees in Congress.) Therefore, the large institutional banks holding these securities suddenly found themselves in the position that they did not know whether they had enough money to cover their own outstanding loans and deposits. So they reduced the amount of loans they made, and also stopped buying these uncertainly valued securities, and even most stand-alone mortgages.
Without the buying of mortgages, original lenders lose the ability to make new loans while still meeting federal deposit requirements. And with the large institutional lenders also not able to make significant loans, the whole credit-based portion of the economy begins to topple. The collateral damage thus far has led to erasure of a number of century old firms on Wall Street, the nation's largest mortgage bank (Washingon Mutual), and four of the largest banks in Europe, to name just a few. Stocks have lost significant value as investor confidence drops, while money flees to hard assets (ironically, like gold). The next round of casualties will be smaller scale lenders and firms without enough cash on hand to meet basic obligations (this will include not a few retailers). Let it go on long enough and we'll be back to being only able to buy what you can pay for in full. Think about how much less economic activity that would entail.
Thus, we have a liquidity crisis, not enough cash flowing in the system. Just like an engine, if there isn't enough lubrication, the engine will not only stop functioning, it will be hard and expensive to repair. The longer you let the damage continue, the more costly the repair.
So, on the Stabilization Act, the sooner done, the better. Rather than worry overmuch about the particular structure of how decisions will be made (ultimately, oversight is the best you'll get, committees really can't make the number of decisions that will have to be made in the timely manner that they will need to be made, and the oversight provisions of the failed bill were pretty good, in my opinion), what we need to to do is write into law that this is the last time.
Last time? Yes, what you write into law are provisions of what will happen the next time. Next time the de-regulators go wild and the system crashes, we don't bail out, we take over completely and run in the public interest -- in the short term. In the intermediate term we break up huge conglomerates, and make the employees co-owners, with an eventual target of making them all solely-employee owned.
No, you can't actually write it into law in a practical sense. Maybe "Sense of the Congress" is the best you can do, though likely not even that. (The number of free marketeers who voted for this provides cover that, just as there are no atheists in foxholes, there are no true free market ideologues when the market will crash without government intervention.)So talk about it. Get it into the public consciousness, keep it going during the next era of good times when the economy is humming along smoothly enough for 60% of the population -- so that the next time the system crashes under the weight of its own logic, we are in a position to dismantle it, brick by brick, without the violence that typically accompanies such a radical change.
Oh, and if you think that this bill would simply hamstring a progressive president, consider the actual consequences of doing nothing on principle -- because there will be even less to work with in that case.