A lot of people on here are happy the bailout failed because it was flawed, others are upset that Congress can't get its act together and agree on a bi-partisan solution, and others don't believe we're in a crisis at all. I strongly believe that reasonable, well-intentioned people can disagree, and the truth is usually somewhere in the middle. However, all the signs at this point are telling me we actually are in a crisis, and any way you slice it, US taxpayers are going to be left holding the bag in a really big way. The question at this point for me is, can our Congress act quickly and smartly enough to have some positive impact on where this goes from here?
More below...
I work in the financial services industry, in the arena of business loans, and I spend my days talking to bankers and corporate borrowers. I can tell you everyone is telling me the same thing right now. Banks aren't loaning money, period. And even borrowers with solid credit can't get loans. The dire effects of frozen credit markets have been well diaried here, so I won't go into it.
Every morning, while getting ready for work, I check out the posts here on DKos and then read some online newspaper articles. Here's what I saw this morning before work, and how arriving at work turned out to be a very alarming event for me:
Bob Herbert writes in today's NY Times:
"Now we’re looking into the abyss... Credit markets have frozen almost solid, banks are toppling like dominoes and brokerage houses are vanishing like props in a magic act."
Go here for the full op-ed: Madmen Reign
The NYTimes editorial board asks "What's Worse than a Flawed Bailout?":
"The question now is whether the stock-market plunge that followed the House’s failure to lead — and a renewed credit freeze — will be enough to get the 133 Republicans who voted against the measure to change their minds. And, more important, whether the damage that the no vote has inflicted is readily reversible."
(emphasis mine) What's Worse Than a Flawed Bailout?
And this from Justin Fox at Time:
"By voting down the proposed $700 billion financial bailout package — and causing a spectacular stock market rout — a majority of members in the House of Representatives made a clear statement that they didn't want to put taxpayers on the hook for the failures of financial institutions. But there's a catch: taxpayers are already on the hook for the failures of financial institutions, and it's possible that the bill will actually be larger without bailout legislation than with it. That's because the regulators who mind the financial industry — the Federal Reserve, Treasury and FDIC — will keep doing what they've been doing: stepping in to prevent the chaotic failure of banks and other large financial institutions. This means continuing to put hundreds of billions of taxpayer dollars at risk, but in a way that adheres to no clear plan of action and doesn't require members of Congress to explicitly approve their actions."
(emphasis mine) Full article is here:Without a Bailout Plan, What Will the Cost Be?
Already feeling very uneasy, I arrived at work today to be greeted by this email from our HR department regarding our employee 401k plan:
"[W]e wanted to re-assure all 401k participants that the assets in their 401k are not assets of [our bank] and are not subject to the claims of their creditors in the event that [our bank] were to become insolvent or commence a proceeding in bankruptcy."
Instead of reassuring me, this made my stomach do flip flops, since I hadn't even contemplated that my 401k could be at risk (aside from a huge hit in value from the stock market plunging). The other thing that really surprised me, is that the bank that holds our 401k is not even one of the banks that has recently gone under - it's another major bank.
So, what happens next? Will another major bank fail before a Congressional bailout plan is passed, effectively forcing a bailout by the Federal government on terms over which the taxpayers have no control?