Why the Failout Failed (at least on Blackish Monday)

Welcome to Fail Street

Welcome to Fail Street

FiveThirtyEight.com: Electoral Projections Done Right: Swing District Congressmen Doomed Bailout.

[via Nate Silver at fivethirtyeight.com]

This was predictable, I suppose, but it’s remarkable to see how strong a relationship there is between today’s failed vote on the bailout and the competitive nature of different House races.

Among 38 incumbent congressmen in races rated as “toss-up” or “lean” by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211.

By comparison, the vote among congressmen who don’t have as much to worry about was essentially even: 197 for, 198 against.

They also added this tidbit from a reader comment.  This is the one that cinches it for me.

UPDATE: A helpful reader named Matt Glassman passed along the fact that, among 26 congressmen NOT running for re-election (almost all of whom are Republicans), 23 voted in favor of the bill, as opposed to 2 against and one abstaining.

And so we see how polling and an election year and a huge financial emergency all come together to crash against the rocks of reality.

What we are left with then, is an electorate fairly split about a bailout package…that most who know how the system works would like to see implemented…and those that have no idea about oppose on general principles.  The fact that it wasn’t passed today led to this….

The day started with silence — the iconic opening bell of the New York Stock Exchange failed to sound — and things just got worse from there, ending in the single biggest one-day point loss in history. The Dow Jones industrial average lost 777.68 to close at 10,365.45. The previous biggest point drop came on Sept. 17, 2001, the first day the market reopened after the 9/11 terrorist attacks. A jittery stock market spent all morning in negative territory as investors worried about the $700 [billion bailout].

[full story]

This is becauase most of these people know what’s going to happen when banks don’t have any money to lend.  We are now seeing the disease spread, and this kind of stuff *REALLY* affects people who hope to retire….soon.

It’s not that bad for people like me who are 30+ years from retirement.  Those, however, currently in the 2-5 year window (read: 40+ million Baby Boomers) don’t have that option.   They get to decide…soon…what to do.

My simple prediction?  They will sell out and the stock market will continue to stagnate.  It has been hugely propped up by this retirement money, and now that people are going to actually pull it out of the market, put it someplace *much* safer (like a bank…ha!) and use it to live, the amount of capital in the stock market is going to tumble….which adversely affects the price of everything else.

I’ve been predicting this general trend for a while now, based mainly on the demographic shift we are seeing as a country.   The whole “U.S. Economic Collapse” thing has been predicted by history, which dictates that large empires running expensive un-ending wars halfway around the world tend to collapse….every, single, time.

The fact that it is our democracy itself (in the form of election-year politics) which is freezing our government when it needs to act is the icing on the crap-cake we will all soon be swallowing.   The irony would be delicious…if it wasn’t for the fact that it smells, tastes, and nourishes….like shit.

UPDATE: In what can only be called par for the course…the McCain Campaign accepted credit for passage of the measure.

“Sen. McCain knew time was short and he came back, he listened and he helped put together the framework of getting everybody to the table, which was necessary to produce a package to avoid a financial catastrophe for this country.” 

On Monday morning, McCain campaign communications director Jill Hazelbaker said on Fox News that the deal would not have happened “without Sen. McCain.” 

“Sen. McCain interrupted his campaign, suspended his campaign activity to come back to Washington to get Republicans around a table,” Hazelbaker said. “Without Sen. McCain, House Republicans would not have appointed a negotiator, which would not have moved this bill forward. 

“It’s really Sen. McCain who got all parties around a table to hammer out a deal that hopefully is in the best interests of the American taxpayer.” 

[full b.s.]

BTW, in addition to the alternate breakdown that started this post (i.e. Politicians facing re-election or Not) one can alsobreak down the vote by party lines.  Democrats 140-95 (~60% Yea) and Republics 65-133 (~33% Yea).

So that claim of “suspend[ing] his campaign activity to come back to Washington to get Republicans around a table” was not only total b.s., it was a total failure of leadership.

UPDATE2: The next step…

Democratic and Republican leaders alike pledged to try again, though the Democrats said GOP lawmakers needed to provide more votes. Bush huddled with his economic advisers about a next step. The House was to reconvene on Thursday instead of adjourning for the year as planned.

[full article]

Umm, Thursday?!?  They do realize the DJIA is going to be at about 9,000 by then, right?  [hmmm…second thought…I’ll say 9,500.]

By then I think the Panic of the People will have set in and the Bailout will get about 90% support and everyone will claim credit…including your and/or your employer’s bank.  😉

5 thoughts on “Why the Failout Failed (at least on Blackish Monday)

  1. Fantastic post and eye opening albeit hardly surprising.

    All of it spits in the face of the dogma that “we shouldn’t be paying for the mistakes of the greedy.” If people are afraid to pay for the mistakes of the home mortgage sector, they should be deathly afraid of the cost for sitting on our hands.

  2. Thanks for the kind comment. I think Nate @ 538 gets most of the credit for doing the legword on what happened. He does great stuff over there.

    And you are right re: sitting on our hands…which I think is my general position. The basic concept of the bailout (give the money to buy crappy mortgages and sell them later) seems sound to me, and could be ultimately quite profitiable for the People (we will certainly be buying at the botton of the market).

    Also, and this is a point I make in the video for tihs week….it ain’t only Wall Street that is “greedy’. In a country that has a negative savings rate, and has been on a 20+ year mission of living far beyond our means…it’s hard to blame Wall Street alone for failing banks and frozen credit.

    That does, however, feed quite a bit into people who don’t want to support the bailout, as they often claim to be “not one of those irresponsible people”.

    Regardless….should be an interesting week. Also, I liked your post on the text message scam. I’ll be quoting some of it.

  3. There’s confluence of reasons behind why our economy is where it’s at and why a massive bank failure will only worsen the problem. I’m actually working on a post giving my viewpoint on why the proposed bailout failed and am definitely planning on using the info you posted here with appropriate links.

    And thank you checking out my blog.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s