Having zero background in economics, I have struggled to fully grasp the obvious enormity of the situation that has befallen Wall Street and, really, the global financial system as a whole. It's almost impossible for me to craft any sort of sweeping, comprehensive response to the administration's proposed 3/4-of-a-trillion-dollar bailout of the financial industry, so what follows is the best I could cobble together:
No longer should any Bush official -- even one as widely respected as Hank Paulson -- be able to walk into the Capitol, present a vague plan, demand 700 billion of the taxpayers' dollars and ask for the authority to implement the plan on his terms simply by saying, "Trust me." The Bush administration has exhausted its political capital, and Sen. Dodd and other leading Democrats have, at least on that point, nailed it.
I also agree with what seems to be a bipartisan consensus that, in the event a bailout plan is passed, the taxpayers should reap the financial rewards of any government investment in Wall Street. Some Republicans have replied that this is socialism. If that's the case, what exactly do you call a $700 billion check written to investment firms for valueless commercial paper? Sen. Jack Reed (another Democrat) pointed out that if the taxpayers take the risks of buying into the administration's bailout plan, they should reap the rewards. He's right.
In the event that a bailout is agreed upon, Sen. Schumer's suggestion that the Treasury take a "deposit" -- $150 billion or so of the requested $700 billion -- and report back to the Banking Committee in several months was a good one. Paulson flatly rejected this idea, but if he didn't like the Banking Committee's answer, perhaps he should ask his bosses why Congress isn't interested in writing them another blank check.
It's also the responsibility of Congress, as Sen. Dodd noted, to ensure that the administration doesn't (again) overstep the constitutional boundaries set down for the executive branch. It's disingenuous for the administration to run to Congress demanding a check, then acting surprised when the Senate wants any sort of oversight over how the taxpayers' money is spent. Congress has a responsibility not only to the taxpayers, but to the Constitution.
Is this a good time to repeal the capital gains tax? Seems like it is to me. Think about the remarkable influx of money to Wall Street from all corners of the globe if this somehow passed.
Isn't the point of the SEC to make sure securities are regulated effectively enough that Wall Street executives don't make reckless decisions and bring our entire financial system to the brink of collapse? Just asking. If the answer to that question is yes, then Sen. McCain's call for the head of SEC Chairman Chris Cox was entirely appropriate.
Democrats don't seem to understand that there are two types of foreclosed-upon homeowners: Those who were hoodwinked by deceptive lending practices (as practiced by Countrywide), and those with already-poor credit who borrowed at subprime rates, put little or no money down, and who were unable to make their mortgage payments because of their own irresponsibility, stupidity and inability to manage their own finances. If the government is going to wade into this mess, someone needs to point out this distinction.
E.J. Dionne of the Washington Post brought up an excellent point: "There is a moral problem for capitalism itself if taxpayers take on a burden created by the foolishness of the privileged and get little compensation in return." Bingo.
And another thing touched on by Dionne (a liberal) and surprisingly few others: How in the world can a government running an enormous deficit afford to spend this much money?
As pointed out by Newt Gingrich, if this was a Democratic administration running to a Republican Congress for money, we would see an almost-universal condemnation of the administration's proposal. It's still stunning to me how, under Bush, the GOP became the party of big government, bigger deficits and higher spending, and that fiscal responsibility and balanced budgets are referenced and cheered at a Democratic convention.
To close: As you might have heard, we'll elect a new president in six weeks.
Sen. Obama has slinked into the background (per usual) and has offered nothing of value vis-a-vis the financial crisis, other than an admonition that this crisis be resolved prudently. (Thanks for your leadership, Professor.) What a statement McCain could make to the voters if he suspended his campaign activities and went to Washington to do what he does best -- forge a bipartisan solution to what could be an unworkable problem.
Whether the Senior Senator likes it or not, the candidate that is going to win the election is the candidate who deals with this issue most effectively. McCain seems to believe that a candidate for the presidency isn't required to demonstrate any economic wherewithal. A president might not need any (either McCain or Obama will obviously have a swarm of advisers), but a candidate certainly does.
Sen. McCain's best move would be to cancel his campaign appearances from now until the weekend (Gov. Palin has been the big draw anyway, not him) and spend the next week in Washington. The media and the public would hang on his every word. He would be lauded for putting the good of the taxpayers before his own political ambitions. He should huddle with his most respected economic advisers -- Romney, Forbes, Fiorina and Whitman -- and hold press conferences twice a day. The nation would have his attention.
First, the Senior Senator wouldn't even need to create a comprehensive proposal. He could sit in on the committee hearings and hold press conferences twice a day, simply opining on the day's events and what the Banking Committee should do next. Second, he could sound a populist tone, railing against reckless financial mavens who are now begging for the taxpayers' assistance and against the unscrupulous lending practices that he has so roundly condemned. Third -- as a purely political move -- he could use this as an opportunity to further distance himself from the Bush administration by criticizing the idea of a $700 billion check written by the taxpayers. Heck -- he could even call it the Bush-Pelosi bailout plan. One of McCain's greatest strengths is his deep concern for the stewardship of taxpayer dollars. Fourth, he could articulate a clear distinction between he and Obama -- I'm here in Washington fighting for you, and he's somewhere out on the campaign trail.
Obviously, the likes of Sens. Dodd and Schumer will be the ones in control of what the Senate does with the administration's plan, and McCain's proposals likely would be little more than soundbites. Still, this is a huge opportunity to build political capital and show leadership on this crucial issue.
I believe that if McCain did this, he'd win the election. Thus far, neither he nor Obama have offered any sort of leadership or direction on this issue. It seems to me that this is a golden opportunity that each is missing.