The Bailout Vote: a People’s Coup, a Crisis of Leadership

By Jill Kuraitis, 9-30-08

We’ve been conned, duped, hoodwinked – and we’re watching you.

Is that what Congress heard before the bailout of Wall Street failed to pass the House of Representatives?

A lot of people think so, including some strange bedfellows.

Conservative group FreedomWorks thinks so, calling the vote “a grassroots revolt.” Their “10 Reasons to Oppose the Wall Street Bailout” is being widely circulated.

FreedomWorks President Matt Kibbe commented,

“Taxpayers have spoken and it is clear that Congress got the message that it is unacceptable to hand Wall Street a $700 billion blank check. In recent weeks the federal government has handed out hundreds of billions in bailouts and guarantees, and it is time to take a step back and see if they have any effect. Just continuing to throw money at the problem is obviously not working. Wall Street needs to take responsibility for the mess it helped create.”

“It took a lot of courage to vote against the bailout today, and stand against a legislative stampede. Private solutions exist for this problem, and we need seriously consider all options that do not put taxpayers on the hook for Wall Street’s bad bets.”

Liberal filmmaker and activist Michael Moore thinks so, too, but claims the “grassroots” label for Democrats.

Everyone said the bill would pass. The masters of the universe were already making celebratory dinner reservations at Manhattan’s finest restaurants. Personal shoppers in Dallas and Atlanta were dispatched to do the early Christmas gifting. Mad Men of Chicago and Miami were popping corks and toasting each other long before the morning latte run.

But what they didn’t know was that hundreds of thousands of Americans woke up yesterday morning and decided it was time for revolt. The politicians never saw it coming. Millions of phone calls and emails hit Congress so hard it was as if Marshall Dillon, Elliot Ness and Dog the Bounty Hunter had descended on D.C. to stop the looting and arrest the thieves.

The Corporate Crime of the Century was halted by a vote of 228 to 205. It was rare and historic; no one could remember a time when a bill supported by the president and the leadership of both parties went down in defeat. That just never happens.

In Time Magazine online’s “Let Risk-Taking Financial Institutions Fail”, Ari J. Officer and Lawrence H. Officer write,

The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history.

Rescuing financial institutions is not the best solution. Yes, banks are needed to provide capital to businesses. But it is not necessary to spend $1 trillion to maintain liquidity. If the government is to intervene, it should pick and choose which claims to purchase; claims that are directly tied to mortgages would be a good start.

Let financial institutions fail, merge or be bought out. The faltering institutions will see their shares devalued and will be likely to be taken over by stronger institutions — as has already started happening. This consolidation of the financial sector is both efficient and inevitable; government action can only delay the adjustment.

In “Revolt of the Nihilists” New York Times columnist David Brooks writes about a crisis of leadership.  “The American century was created by American leadership, which is scarcer than credit just about now.”

In 1933, Franklin Roosevelt inherited an economic crisis. He understood that his first job was to restore confidence, to give people a sense that somebody was in charge, that something was going to be done.

This generation of political leaders is confronting a similar situation, and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed. Instead, by rejecting the rescue package on Monday, they have made the psychological climate much worse.
George W. Bush is completely out of juice, having squandered his influence with Republicans as well as Democrats. Treasury Secretary Henry Paulson is a smart moneyman, but an inept legislator. He was told time and time again that House Republicans would not support his bill, and his response was to get down on bended knee before House Speaker Nancy Pelosi.

Brooks again:

What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.

Last week, conservative economist Ben Stein wrote this damning paragraph in the New York Times:

First, I am furious at what the traders, speculators, hedge funds and the government have done to everyone who is saving and investing for retirement and future security. Millions of us did nothing wrong, according to the accepted wisdom of the age. We saved. We put a large part of our money into the stock market, as we were urged to do. Because the market wasn’t at ridiculously high levels, it seemed prudent to invest in broad indexes, foreign indexes and small- and large-cap indexes.

Now we have had the rug pulled out from under us. Our retirements have been put into severe jeopardy. The “earnings” part of those price-to-earnings ratios turns out to have been fiction for some financial companies, which normally account for a big part of total corporate earnings.

And this opinion from the New York Times’ Bob Herbert, “When Madmen Reign” is Herbert’s take on the financial industry’s grip on Congress:

These were the reckless clowns who led us into the foolish multitrillion-dollar debacle in Iraq and who crafted tax policies that enormously benefited millionaires and billionaires while at the same time ran up staggering amounts of government debt. This is the crowd that contributed mightily to the greatest disparities in wealth in the U.S. since the gilded age.

What do you think?  Who is most responsible for the vote’s failure in the House?  Did “the people” reign this time?