Selected House Republicans said they had never agreed to a bailout deal, despite only hours earlier Bush Administration officials announcing an agreement on "fundamentals."That segment of House Republicans, many from the party's conservative wing, say they oppose assisting Wall Street firms, which they believe made wrong business choices that led to the crisis. As an alternative, House Republicans offered a plan under which companies would buy insurance from the government, and that includes proposed tax cuts and a relaxation of government regulations.
Currency trader Andrew Resnick said the House Republicans' plan was deficient from a number of standpoints.
"Is this the way a responsible coalition behaves? You say nothing all day, then in the dead of night present a questionable plan via back-channels? Frankly, it's reckless and bizarre," Resnick said. "The House Republicans are playing with fire. Here we are trying to prevent a financial crisis from turning into a catastrophe and one political camp wants to play partisan politics. It's the height or depth of public irresponsibility."
Resnick said credit markets, already stressed by a series of financial institution and bank failures, as well as forced margin calls, could degenerate further.
"I'll tell you right now this whole [expletive] system could come crashing down if banks continue to hoard funds and a series of cascading sales starts to occur," Resnick said. "The House Republican plan also isn't credible. Few expect it to provide the liquidity necessary to keep the financial system functioning, and their tax cut proposal is just nuts. They want to increase the federal budget deficit more? With the dollar weak and after eight years of deficits?" Resnick added that he was presently flat, or had no open currency trading positions.
Economist David H. Wang told BloggingStocks Friday if the House Republicans' stance is a tactic to enable Republican Party presidential candidate U.S. Sen. John McCain, R-Arizona, to participate in the talks and/or any potential bailout agreement, they have their priorities confused.
"This is a troubling development. If we don't get an assistance package to free-up the credit markets soon, there is a high likelihood we will experience the worst financial panic since 1929. The damage would produce a long and painful recession, or worse. It is my hope that this concern would take precedence over presidential campaign concerns," Wang said. "Hopefully, all parties in Washington will see this and act responsibly."
Currency markets
The dollar moved sharply lower against several key currencies early Friday but rose against the euro following word that House Republicans splintered from a broad Washington coalition and said they would not support the Bush Administration's $700 billion bailout plan.
The dollar declined one-half cent versus the British pound to $1.8416 and fell 1.25 yen to 105.35 versus Japan's yen after the sudden disagreement. The dollar has managed to hold its own against the euro so far, rising about one-quarter cent to $1.4632.
Forex / Economic Analysis: The view from here, the hope, really, is that the talk breakdown represents a speed-bump on the road to solving the financial crisis. But if House Republicans are betting that House Speaker Nancy Pelosi, D-California, will put her House Democratic coalition on the line by bringing a bill to the floor without House Republican support, they are sorely mistaken. Rep. Pelosi will not have her coalition bear the brunt of the political responsibility for the bill, so that House Republicans can tell voters before the election they opposed 'another big spending bill.' For this bill to pass, it must have bipartisan support. If it doesn't get it, and a financial catastrophe ensues, the blame can be placed squarely at the feet of House Republicans.
Further, at this juncture, it's difficult to assess Sen. McCain's role in the above, or his stance regarding the bailout package because he hasn't taken a stance on the bailout plan. But then, what was his reason for 'suspending' his presidential campaign and traveling to Washington?
Reader Comments (Page 1 of 1)
9-26-2008 @ 11:11AM
Ben said...
A few things:
The very name "bailout" gives this the wrong connotation. A "bailout" implies that this is going to end the issues that the economy is facing. No guarantees for that.
The second, the problem really isn't liquidity, but insolvency. There IS money out there it's just that everyone is too scared of these toxic debts to buy them and try and collect the money that is due.
It might not be the safest position, and I am wary about bringing milkyourmoney.com into this but, maybe the best course of action might be to not dump a pile of money into companies that no one is going to touch regardless of whether the Fed is backing them.
Even FDIC is concerned, when will it end?
9-26-2008 @ 11:21AM
David S. said...
This bailout is ludicrous ! We're heading for tough times either way, why the hell should we throw a $700 billion slush fund and dictatorial powers to seize corporations without the possibility of legal review to the same jerks who caused this mess to begin with? We need to get all these wallstreet freaks and oil barons out of our government once and for all.
9-26-2008 @ 12:01PM
Bill said...
Reid should stop his politics. He says politics are not helping and I agree, but every other word out of his mouth is political...blaming republicans for every issue. If he was a leader, he would have helped bring both parties to agreement and there would NOT have been any major surprises to derail the process. He should stop the politics and start the leadership so the taxpayers are protected the best they can be.
Bill
9-26-2008 @ 11:52AM
Ed said...
take the 2% interest that the government gives the banks so they can rob the public at 32% interest on credit cards and ofeer it to the consumers to pay down their CC and lower their interest rates on mortgages. Interest paid to these banks and wall street does nothing to help Gross National Product.Limit credit card companies to to 5 to 7% interest. With the government providing mortgage interest at 3% probably 90% of the mortgage and credit card problems would be resolved and markets (housing etc) would quickly stablize. We should never ever again allow anyone to charge interest rates that years ago gansters would have been put in jail.
9-26-2008 @ 7:54PM
A Patriot said...
The Muslim Agenda - Gay Rights and the Destruction of Christianity and This Country and our Economy
Historically, Religious Zealots, like Radical Muslims are smart enough to make LONG RANGE PLANS. The objective of the Radical Muslims is to destroy Christianity. They are making great progress using Americans against Americans. Gays/Lesbians against Heterosexuals. 1. Put Bill Clinton in the Whitehouse and Pelosi in Congress. Bill destroyed our economy. Look at the Current Mess and the Clintons helped with 911 by allowing the Terrorists to enter the Country. Bill spent tax dollars to further the Muslim Agenda by Slaughtering 1000's of Christians in Kosovo. 2. Let Bush, a Republican take the Blame. 3. Put Barack Obama in the Whitehouse and continue to pit Gays against Heterosexuals until Gays "win" and Christianity is destroyed. 4. Islamic Law will prevail and of course, ultimately Gays lose because Muslims don't support Gays. I know, everybody here will say "I'm crazy" just as I was "crazy" in opposing Pelosi's "bail out the Rich Plan" on housing foreclosures - Rich are NOW bailed out!
Vote for Barack Hussein obama for President to COMPLETE the circle the Radical Muslims need to bring down America.
9-27-2008 @ 10:21AM
Joseph said...
Someone explain to me this; if we are going to take over 99% of the American mortgage industry, and let the banks start fresh, so we can have what, another 100 year buildup to this? Why don't we just take over the mortgages and let the banks fail.
Forgive the mortgages to the homeowners.
Then led the fed lend directly to the people and set up socialized lending?
Wouldn't this free up $700 billion for consumers to dump back into the economy, prevent this from ever happening again, and get the banks out of our government?
9-27-2008 @ 1:04PM
Dave R said...
The plan is reckless, bizarre; fiscally irresponsible. Fortunately a few in Congress get that, and are stepping up to prevent the fiasco. Let the market run its course. There will still be Main Street bankers who haven't been speculating on junk mortgage securities who will be able to step in and fund homeowners and businesses.
Dave
http://www.islandersoftware.com/weblog/2008/09/27/just-say-no-to-the-bailout-plan/