The first Bush/Paulson/Pelosi bailout plan to come before Congress was defeated. Wall Street reacted, the Dow plunged, world markets trembled, and we now face a financial future that can at best be described as uncertain.
With the elections a few weeks away, no one—Democrat or Republican—wanted to vote for a bill that was perceived by many as giving a helping hand up to the man from Wall Street while stepping on the face of the man from Main Street. With their jobs at stake, a majority of Representatives killed a bill that may have been the only feasible option out of this mess.
The Republican leadership wasn’t there, and you could have bet the Democrats weren’t going to go all in without significant support from the GOP. So it failed.
But if we can put aside the predictions of gloom and doom (Financial Pearl Harbor? Great Depression II? Financial Armageddon?) for just a moment, the Republicans may have actually done us a favor.
Economist and author Robert Kuttner (Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency) spoke to host Neal Conan on NPR’s All Things Considered yesterday as the vote was transpiring. They actually get the news of the bill’s defeat in the middle of the interview (at around 05:30), as the vote closed.
Now that we have the chance to take another crack at it, one thing that we absolutely must have, says Kuttner, is “direct government refinancing of home mortgages” a la the Homeowners Loan Corporation, created under F.D.R.’s New Deal.
And, Kuttner goes on, “instead of having government simply buy up toxic securities, and get the toxic securities off the books of these banks, you need to get rid of the toxic executives.”