Monday, September 29, 2008

Sizing Up the Vote Against the Wall Street Bailout

I was trying to have a business lunch while watching the US House of Representatives vote regarding the Wall Street bailout on TV. It wasn't easy. On the one hand, I wanted it to pass. I grew up with two parents who were raised during the Great Depression and the life they lived has had an impression on how I look at things. Generally speaking, I have denounced the philosophy of fear and scarcity that I grew up with, but when they spoke about the problems with banks and the fears of the Stock Market, I had to take notice. On the other hand, passage of this bill would be the abandonment of moral hazard on Wall Street and further promote a financial system growing out of control.

I was a little surprised that the bill didn't make it. I actually expected it to do more than squeak by, let alone crash and burn. It demonstrated how deep the angst of the American voters is and how great the fear is among members of Congress towards those voters. We have an election that is less than six weeks and the more vulnerable a member of Congress, the less likely he or she was going to vote for it. Clearly, many members rightly feel like they are in the cross hair of angry voters.

Most Republicans were making more than a "protest vote." Some felt that $700 billion being voted on in such a short time frame didn't make sense. What could be hidden in a bill that virtually no one had enough time to thoroughly understand it? Most feared there could be plenty and it gave Secretary of the Treasury Henry Paulson carte blanche authority for bailing out other financial institutions (including some outside of this country). Most Republicans wanted a proposal that didn't have taxpayers bearing the lion's share of the proposal. They wanted a system more like the Federal Deposit Insurance Corporation, where the banks have to pay a premium to protect their accounts. They offered a list of other reforms that would have dramatically reduce the final costs of the multibillion dollar bailout by hundreds of billions of dollars.

The Republican proposals didn't even receive serious consideration because they didn't offer quick or simple solutions, would require more pain on Wall Street (and also Main Street) in order to achieve long term reform, and simply didn't have the "panacea effect" that investors are looking for. The bottom line is that Wall Street and Washington wants average Americans to do the hard work that our politicians and financial institutions should be responsible for.

In the end, I'm glad that the House Republicans put the breaks on this proposal. Certainly, we need some type of bill to get us out of this situation, but it should be done with deliberation and not at the expense of future generations.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the
Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

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