Impressions

The Bailout That Wasn’t

By Tim Holland

What a mess. This will go down in the history of the United States of America as one of the most poorly handled pieces of legislation ever to be presented to and voted on by Congress.

From its inception in the Treasury Department, to its handling by the President, to the reaction of the leadership in Congress, to the grandstanding by a Presidential candidate, to the compromises that were crafted before a White House photo-op conference, to the subsequent sandbagging of the compromise for the sake of political philosophy and media attention – well, we could go on and on but it wouldn’t change where we are.

So let’s back up just a bit, lower the voices and see where the problem is.

To begin with the word “bailout” is the equivalent of waving a red flag in front of a bull. The Treasury Department, in its original proposal, actually called their plan a “bailout.” This has to be the highest form of stupidity ever exhibited by a public official. The Treasury Secretary actually thought he was presenting a document to the Congress (the organization) and didn’t recognize that Members of Congress report to those who elected them; that they are in touch with their people and respond to their whims. “Bailout” is the one word the American “people” did not want to hear.

It is easy to see why Secretary Paulson used the word “bailout” since that is exactly what his three page proposal was. What was he thinking? Could it be we are seeing exactly what is wrong with corporate America: the chief executive (formerly of Goldman Sachs) whose word is law, who answers to no-one except the chairman of the company (unless he’s also the chairman), who is surrounded by “yes” men and women, who views employees as units of expense, and is consumed with the “big picture” and has been taught to stay away from details – leave them to others?

Did he really think that Congress works like an executive committee meeting of his board where he provides a brief outline of what he wants to do; gets it rubber stamped and then moves on?

So what happened? The leadership of both parties knew immediately that they were being handed a hot potato. The idea of a “bailout” was a non-starter so they worked day and night to come up with an alternative plan and seemed to be making significant progress until a certain presidential candidate decided to have a General Alexander Haig moment. Remember Haig? He was Reagan’s Secretary of State when Reagan was hospitalized due to an assassination attempt. “I’m in control here.” was the famous quote he made at a news conference. It was subsequently pointed out to him that he was Secretary of State and not Vice President.

The candidate demanded that the President call a meeting of all the participants so that a agreement could be worked out. According to reports from inside the room (the one hour meeting was closed after the candidates’ photo ops), this is where everything started to break down.

The “bailout” designed by the Treasury Secretary was converted into a “rescue plan” for the American economy and included items that were not there to begin with: limitations on how the funds would be drawn down, oversight of the entire process by Congress and administration representatives, re-regulation commitment for the industry, assistance for individuals caught in the financial web, protection for the country’s funds being committed, among other provisions. It was not perfect by any means but it had what the experts said had to be there to stop the downward spiral in the financial markets.

The trouble was that nobody explained to the people on Main Street how it was going to affect them. The news reports continued to refer to the proposal as a “bailout” of Wall Street. Analysis on the TV news broadcasts talked about the lack of credit availability, banks refusing to lend to other banks, banks being unable to refinance debt and obtain short term loans. The problem was that no-one put a human face on the problem. So banks can’t lend to one another – so what? If a bank goes under like Washington Mutual - so what - I’ve got FDIC insurance? If Lehman Brothers goes bankrupt – so what – I don’t have anything to do with them, in fact I don’t even know what they do?

It is eminently clear that if there is an enormous lack of understanding on Main Street of how the financial markets work in the United States. However, there seems to be an even bigger gap in the ability of the media and the education system not only to understand what has been going on but also to explain it to everyone else, which, of course, brings us to where we are.

Over the next couple of days we have another chance of getting it right. Speaker Pelosi, no more sermons and sanctimonious finger pointing; Conservative Republicans, forget the posturing and pandering to an ideological base – if you don’t really understand what is happening, find out and if you still don’t understand than don’t vote rather than be an obstruction to a solution. To the Presidential candidates, read the legislation and then do your CURRENT JOB: cast your vote in the Senate.

Note:

Tim Holland is a stall writer for ToTheCenter.com, an internet news magazine. He currently writes a weekly Op-Ed column for the magazine on a variety of topics. Copies of previous Op-Ed columns and Essays can be found at www.tim-holland.com. Comments are welcome and may be sent to: Admin@tim-holland.com