As you have heard, the bailout bill failed in the House.
The bickering starts. House Minority Leader John Boehner fires the first, and very absurd, salvo: it's Nancy Pelosi's fault! "'I do believe that we could have gotten there today had it not been for this partisan speech that the speaker gave on the floor of the House,' House Minority Leader John Boehner (R-Ohio) said, adding that Pelosi 'poisoned' the GOP conference." That's the mark of a true leader: when something goes wrong on your team, blame...someone else?
Barney Frank fires back:
"And because somebody hurt their feelings, they decide to punish the country."
The market reacted and the Dow dropped 778 points, "knocking out approximately $1.2 trillion in market value" -- the first day ever the market lost that much value.
I know some folks are disappointed that the bailout bill failed today, but I have to say, this is the way our political system is supposed to work. That is, responsive. As Nate Silver demonstrates, it was the swing district House Representatives -- both Republican and Democratic -- that sunk the bill. And the political cost of being an ardent backer of the bill is high; just ask Mitch McConnell, who finds himself in a "free-for-all in the polls" and could very well see his seat turn over to his challenger, Bruce Lunsford.
Looks like that cap for executive compensation was toothless: "The plan ostensibly prohibits golden parachute payments to CEOs and other "C-level" execs at bailed-out companies. However, it really only prevents payments on severance deals that are struck AFTER the bailout (specifically, it prohibits these deals completely). There is nothing about cancelling the severance payments that the executives are ALREADY contractually entitled to. What this means in practice is that bailed-out companies will have trouble hiring the best talent...because why would you work at Bailed Out Company A when you could go across the street and get a fat severance deal? It also doesn't mean the companies can't pay their CEOs $500 million a year."
Some folks see the failed bailout bill as an opportunity to reconsider, and then do it right. Kossak Meteor Blades agrees, and has a roundup of what some liberal economists are suggesting. Here's MB's advice for the Congressional Democrats: "None of those alternatives may succeed in getting the necessary votes. But one of the problems with what the Democratic leadership does on so many occasions is compromise first (which often means capitulate), then vote. It's not the losses that are irksome, it's the unwillingness to put up a solid proposal, then fight for it. As if the voters will be upset with them for being uncooperative.
"If they would put a fight, a real fight, and then lose, they would have a perfect argument when they went to the voters. They could say: "Look, first we tried to get the best possible deal. The Republicans shot it down. So then we compromised, and they shot that down. So finally we gave in because something had to be done. But you see who the problem is here, right?"
Nouriel Roubini opines that we should be following the action during the Scandanavian banking crisis: "In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system. Purchase of toxic assets instead - in most cases in which it was used - made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico)."
Roubini offers this little parting jab: "This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners."
I like the way MarkT thinks: "A couple of ideas are out there, but not seriously considered. They have to do with making the people caused the mess clean it up. One would be a surtax on high income taxpayers to pay for the bailout. The second idea is a small tax, say a quarter percent (.0025) on all stock transactions. It would raise about $150 billion per year, and would make Wall Street pay for Wall Street's problems."
And finally Kevin Drum: "An awful lot of people really, really still don't get it. I swear, if I hear one more blogger or pundit suggesting that maybe it's actually a good thing the bailout bill failed because now we have a chance to pass an even better bill, I'm going to scream."
