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Wednesday, September 24, 2008

Majority of the Minority Needed

Along the lines of Number Three's Gaming Theory below, Pelosi is clearly cognizant of the political peril involved in the Wall Street bailout. She intends to have bipartisan cover if the Congress is to take action that is going to be progressively more unpopular as it becomes more widely understood.

As a new twist on the old Hastert "majority of the majority must support" dictum, Pelosi is demanding that a majority of the minority party support the Wall Street bailout package.

To compound the political difficulties, it looks like an almost sure-fire losing scenario for the country's leadership. Here are the possibilities:
1. If Congress passes the bill, and it helps avoid a meltdown, Congress won't get credit for it because nobody will know whether the meltdown would have happened absent congressional action. The public will still be angry about the price tag.
2. If Congress fails to pass a bill, and a financial meltdown occurs, their lack of action will be blamed.
3. If Congress passes a bill, saddles the taxpayers with these huge obligations, and a recession happens anyway, they will be public enemy number one.
4. Congress fails to pass a bill and things do not go dramatically south in short order.
Number four is the only winning scenario here, politically speaking.

Despite the general consensus that Congress is going to deliver something, I'm beginning to wonder whether the rank and file are going to let their leaders deliver on the promises made in negotiating with Treasury over the weekend.

Voters aren't ever going to be able to understand the economic justifications involved. They are just going to see taxpayer money being handed to Wall Street tycoons. I don't know how you sell this to voters, especially in an election season and in an environment where there are defectors and competing elite arguments. Given the public mood right now and the level of trust enjoyed by our political institutions, it looks like the political equivalent of waving a red flag in front of a charging bull.

There was some potent rhetoric being thrown around in Congress yesterday. We'll see what happens with the House Financial Services Cmte hearing today . . .


At 1:18 PM, Blogger Paul said...

I've read that Reid has also said that McCain must come out in full support too. So you have the Democratic leadership of both the House and Senate saying Republicans must be on board. I think that's a sine non qua for the Dems.

But I'm skeptical of the entire ploy, especially given Paulson's claim yesterday that he didn't include oversight in the proposal because that would be presumptuous. What a load of crap. The language was nothing other than a blatant grab for power. These guys are proven liars. Why trust them? And why negotiate in good faith and put in oversight when the President, with his unified theory of the executive, can just make a signing statement and ignore those provisions?

Personally, I hope things don't go dramatically south but I'd rather risk that than once again trust anything Bush and his surrogates say. Besides, if things do go south quickly, more of the blame is likely to get laid at the feet of the Republicans for getting us into this mess to begin with. I think a majority of voters understands that an ounce of prevention is worth ten pounds of cure.

At 3:11 PM, Blogger Paul said...

The more I hear Bernanke and Paulson talk, the more it seems to me they think this entire mess is just one of perceptions and confidence. Just show some "leadership" and "authority", and presto, the problem will go away. These guys haven't figured out that in the real world this game only works for a while, but eventually investors want some real assets to back up the talk. I don't believe that putting up the worthless credit of the insolvent government of the US as equity or printing more paper money is going to help in the long run. In fact, I think it will lead to a greater disaster down the road in that the rest of the world will finally realize that the dollar isn't worth the paper it's printed on and our entire country's finances are a shithouse of cards. Right now they're just talking about mortgages. What about the credit card debt? Banks have spent the last 10 years handing out an outrageous amount of revolving credit that is more toxic than the mortgages. Any kind of bailout for financial institutions will eventually have to involve this.


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