Bailout Dies A Painful Death: Good Riddance?

This afternoon, the U.S. House of Representatives rejected the Bush/Paulson $700 Billion Bailout on a vote of 205 to 228. In partisan-laced rhetoric, House leaders blamed each other for the measure’s failure.
Was it really the Republicans fault? Granted, they voted against their President 2 to 1. However, the Democrats weren’t exactly united in their support. If just 13 of the 70-odd Democrats switched their votes to ‘Yea’, the bill would have passed. But alas, it failed.

The American People Have Spoken

I take a slightly different tact. Instead of assigning blame to political parties, let’s look to the root cause: U.S. Taxpayers. If citizens had not demanded their representatives actually represent their interests, this bill would have passed. Instead, 228 members of Congress decided to stand with their constituents. The Capitol Switchboard was inundated with calls demanding ‘NO’ on the bailout by 9 to 1! The people have spoken. US Treasury Secretary Hank Paulson goes home empty-handed, at least today.

Last week, Paulson urged Congress to give him $700 billion. The threats were vague, but he suggested a catastrophic outcome if he didn’t get the money. It’s too early to tell if catastrophe has struck — right now it’s looking doubtful Paulson was right.

Corrections Happen

Regardless of who is correct – the American People or former-Goldman Sachs CEO, Hank Paulson — I keep hearing this mantra in the background. It seems difficult to escape the droning voice of an Economics 101 professor: “Markets don’t go up forever. Corrections happen. This is life.”

If Washington wants to keep on playing Greenspan’s broken record of intervention, then we will delay the inevitable outcome: more pain – later. But, if we take our lumps and watch a few banks go bust, toxic mortgage-backed-securities will get flushed from the system. If we’re lucky, some of the toxic traders and derivative-makers will go down the same pipe.

Should we trust the same people who started this mess to clean it up? Seems like Goldman Sachs alum, Congress, and the President should not be trusted to fix what they broke in the first place. We should be especially wary of a bill they ramrod through Washington in a week. On this point, I’m siding with the American people. Let Wall Street find $700 billion some other place. Leave us out of it.

“Markets don’t go up forever. Corrections happen. This is life.”