More thoughts on the failed House vote

Looks like we'll get some nice empirical evidence about whether or not a bailout is needed. Too bad we don't get to run the experiment twice if we don't like the result.

Hopefully, the markets will survive and we can take a deep breath in relief.

Or, if you want to be gloomy, the Congress just showed us that, in addition to a financial crisis, we have a political crisis. Now lots of acrimony that will make it harder to get anything useful done. Here's another worry, imagine we add to this mix a disputed election debacle like the 2000 race. Let's say McCain wins, but by really thin disputable margins. Let's combine that with continued deterioration of the markets, and continued complete chaos in Congress. Lots of us Californians will be REALLY pissed, because of bad blood since 2000. If you want to be really gloomy, what's to stop us from declaring independence and jumping from a sinking ship?

That's what really bothers me, there seems to be no credible limit on how bad it can get. Talk about uncertainty!

lets remember only 33% of Republicans voted for the bill compared to 60% of Democrats. It appears obvious that more Democrats were willing to carry the presidents water than Republicans.

I'm going to try to go cold turkey after this commenting relapse, but before I do...

Mr. Silver seems to have a strange view of democratic accountability. Let alone the issue of whether this retiring politicians want to slide into comfy positions on various boards of directors.

The Dow didn't even come close to the 'Black Monday' drop of 20+%. Considering Paulsen's best efforts to both talk up the market by saying the deal was done, and his dire warnings in Congress didn't rubber stamp the plan, I'd say that's not too bad.

None of this is to say the US economy is not in trouble. It is, it should be, it has great structural problems. This is gonna hurt. But it was gonna hurt sooner or later anyway.

Tell Sarah I love her...

You can be more specific than "Congress" in your analysis (see your point #1). Try "GOP". That's the responsible party. And they voted against the bailout because their feelings were hurt by Nancy Pelosi's speech. "Country first"? Not bloody likely.

I gather that, while McCain was eager for the credit if the measure passed, he's refusing to talk to anyone now that the measure failed---presumably because it shows his own lack of influence in the GOP.

The histrionics about this are getting crazy. Today's economy is not the economy of 1929, and this weakness in the financial markets cannot be cured by Congress stepping in an playing the role of patsy buyer of securities at an (artificially inflated) price no one else is willing to pay.

To paraphrase Michelle Obama, today is the first time in my adult life I can say I am proud of my Congress. They stood up to a fast-talking Goldman man (Paulson) who was trying to get money to save his buddies' hides. Good on them. If either McCain or Obama had the sack to do the same thing, I'd vote for the one that did in a heartbeat.

The markets are not in trouble. One small sliver of it is, and this is precisely why we have bankruptcy law and bankruptcy courts, to sort out the good assets from the bad and to let the insolvent companies get out of the way. No one can credibly compare this to the great depression, it's not close. This "downturn" (there isn't one, a decline in stock prices is not a "downturn") is not anything real, it's a creation of the media who are hyping things they don't understand (because if they understood, they'd be IN the industries they are covering, making a killing) and who live mainly in New York, which will obviously be hit quite hard by problems in the Financial Sector (6% of the total economy, IIRC).

Elsewhere, it's just not that big a deal.

The other comments suggest I should calm myself down. OK. I'll do that. What else can one really do?

This comes on the heels of a string of bailous and talks of bailouts. I think a lot of taxpayers are getting sick and tired of subsidizing failure, and that the "no" voters are hearing that resentment.

to point 3 - you could also argue that retiring representatives are least nuetral - want to keep their future employers (financial institutions and the lobbyists who represent them) happy.

i wonder, dan, if you feel that a bad bill passed now is better than a better bill passed later. are our financial markets so fickle and short-sighted that action must be taken today? what is the trade-off between time, quality, and results?

I have to shake my head in amazement at those who spout a variation of: "Well, there was not a total 90% meltdown of the economy today, so therefore there is no crisis." As if meltdowns occur only in a single 24 hour period. The stock market crash of 1929 happened over a full month, not a single day. The Great Depression hit over a series of shocks and declines over 3 and a half years, not 3 and a half hours.

What's wrong with waiting a month or two? Let's build an analogy. There's a 5-story building on fire. Firefighters split into two camps. One says: "hey, we probably should put out the fire while its just confined to one floor." The other camp says: "Nah, let's wait and see if it puts itself out." Who has the better approach?

And Nate Silver is a dumbass. The only people reveling in the misery of others today are Republicans who welcome a depression in the name of hurting the Wall Street CEOs.

Pelosi and her Dems could have done this deal themselves if they wanted.

Face it, the Dems want the economy to tank because they think it'll help put Captain Racist in office. Pelosi did this on purpose. What a cretin.

OK. I'm confused by all this. I get a sense that there's a "crisis" from some, and others are saying, it's not THAT bad. So how can you tell? Is economics that open ended that the profession can't tell the difference between a thunderstorm and a Category 5 hurricane? It seems some kind of consensus opinion would be useful, since it's really hard to shape policy to respond to such an abstract and intangible threat. Do we really have to wait for runs on the neighborhood banks and mass layoffs before we can all agree on the nature and scale of the crisis?

With regard to to point 3, do we really need another attack on unnamed "liberals?" Nate Silver doesn't link to the people he's criticizing, and apparently cannot even remember their names, meaning that there is no way to fact check his assertion that the unnamed people he is referring to are in fact liberals.

I can say that looking at the front page of redstate.com, which is clearly not a liberal site, I don't find a single piece that expresses any concern that people might be hurt by the failure to pass this bill. Instead, there are articles claiming that the failure of the bill to pass shows that Pelosi is a weak leader. The merits of the bill are not the issue; bashing Democrats is.

Angus mentioned a fact that's also been bothering me when I mull over the agitation of the let's-blame-Republicans crowd: the 1929 stock market collapse didn't all happen in one day. The current troubles have also been going on for months -- if we mark their beginning from when Bear Stearns collapsed and vanished overnight.

As far as opinions go, however, Angus supposed that there are "Republicans who welcome a depression in the name of hurting the Wall Street CEOs." Yet "hurting the Wall Street CEOs" has been the hallmark of Democrat partisans and Pelosi pseudo-populists for weeks now. I'm just amazed that the gang of Nancy Pelosi, Barney Frank, and Chris Dodd came as close as they did to passing a bailout bill and laying all the public scorn for bailing out Wall Street on those eeeevil pro-business Republicans. Such cognitive dissonance should cause painful migraine headaches!

Pelosi and her Dems could have done this deal themselves if they wanted.

Then it would have to be a bill that the entire Democratic caucus could get behind, not a bipartisan bill worked out with the leadership of the opposition party.

Would any Republicans get behind a bill for spending hundreds of billions on preferred stock of the banks, thereby recapitalizing them by partly socializing them? Mix in a few consumer protections and mandatory workout provisions, and you could easily get the bill to pass with Democratic votes alone. Give some money to ACORN, while you are at it to make it even more unpalatable - that is the sort of stunt Delay used to do.

But would the Senate ever get to vote on it? I doubt it.

If passed by the Senate, would Bush veto it? I am sure he would, although I could be wrong on that one.

So what was your point?

The commentors arguing about whether the Dems or the Repubs should be blamed (or credited) for yesterday's House vote sound just like the morons in congress. The members who killed the legislation, or at least the ones who led the opposition, are the know-nothing populists of both parties who know what the voters want and are going to give it to them good and hard.

The point, wps, is that the majority of know-nothing populists are in the Republican party, if you look at the votes: 60% of Democrats voted for the measure, 67% of Republicans voted against the measure. Can you see the difference?

Here's the problem with the warning that "real" people, and not just the speculating classes, will get hurt in the absence of a "bailout:" these people have already been hurt(ing) for years. Their—our— "schadenfreude" is not a vain conceit; it is time "they feel our pain."

There's a telling irony in all this. The political failure to pass the initial package is a product of all the wrong motives, yet in effect it does represent something like "the will of the people." And these "people" seem suddenly alert to a reality they have placidly ignored for a quarter century—namely, the tacit bargain they've struck to let the elites have their way so long as in return they "deliver the goods" and leave us alone to enjoy them. Guess what? We really want those goods now—and a whole new bargain!

I blame Paulson for this, not the House. He gave the Street reason to expect megabux that weren't his to give. If he'd been acting responsibly, he'd've negotiated with Congressional leadership before even saying anything about a plan, much less a $$$ figure. We'd've gotten a better plan, and it probably would've passed.

Remember, only Congress has the authority to authorize money.

[...] scientists Dan Drezner has already noted that retiring representatives–”who therefore can perhaps be described [...]

Michael K (#17) Excellent point.

I remember a few years ago on this blog participating in several heated discussions about the post dot.bomb depression in the high tech sector. Daniel's opinion (and that of most mainstream economists at the time) is that it wasn't a problem because it wasn't showing up in the economic statistics much. My retort was that it was showing up in massive corporate bankruptcies and near-bankruptcies.

Enron was the poster child of that time because it's collapse was because of fraud. Worldcom was another example of (some) fraud). But there were many, many other examples of enormous, historically solid companies going bust or nearly so without any hint of fraud. AT&T which once had a market cap over $300 billion was eventually sold for $16 billion - a 95% fall. And that was pretty typical in the telecom & high tech sectors. Yet the GDP barely moved. I argued that it was because the official economic statistics had not evolved to cover corporate R&D investments, therefore the collapse of those investments was also missed. Daniel didn't buy it.

One thing I recall from studying the Great depression is the fact that economists studying the 20's realized that there had been a major farm depression from about 1923 on, gathering force, but that mainstream economists like Irving "Permanent Prosperity" Fischer completely missed it at the time. Many of the depression-era economists felt that the weakness of the *real* economy contributed to the 1929 panic and ongoing weakness of the banks from 1929-1932

I suspect that the economists of the 2010 decade will discover something similar - perhaps an undergrad whose dad lost his job in 2001...... And they may well conclude that the weaknesses exposed in 2001-2003 helpd contribute to the Panic of 2008....