Will Wall Street now Bail on The GOP?

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The market closed down 777 points today – or 8%.  The figures I’ve been hearing state that this is about 1.2 trillion dollars worth of wealth that just vanished.  That 1.2 trillion dollars (nearly twice the bailout) is held by a lot of different interests, but particularly the Republican base – free market capitalists and the upper 1% income earners.  In addition, it’s held by the much heralded ‘Main Street’ and middle-class America.

So how does this affect the electorate?  Well, let’s get back to the Republican base vote again – the rich and free market folks.  The roller-coaster ride by the market over the last week has been tied directly to the potential passage of a bail-out bill.  The market reacted negatively last week to the failures of a deal getting done.  Monday’s big loss was a result of the GOP again not getting on board and nixing the deal.  The Republicans can claim all they want that the speech by Pelosi caused them to vote against the bill.  But the reasons don’t matter – whether ideology, feelings, or good intentions.  The World and Wall Street wanted to see this bill done.  The Democrats delivered 60% yea votes to the bill and the Republicans only 33%.  The GOP needed to deliver only 39% of the vote or 12 more (coincidentally that’s the exact number that the GOP claimed that Pelosi speech turned away from voting yes).  The problem for the Republican Party is no matter how much they hem and haw and complain Pelosi causing the rift, the bottom line is they couldn’t muster 39% (votes they claim they had, by the way…until ‘the speech’) of their caucus to support the bill.  Wall Street isn’t going to blame the Democrats.  Everyone knows the bill is unpopular and delivering 60% is very good in the spirit of cooperation of bipartisanship that the leaders were working with all week.

Do you think Wall Street will give the Republicans a pass on this since, after all, they support their ideology?  Probably not.  1 trillion dollars of wealth is not easy to swallow losing.  True, some of it will be made back after a proposal passes.  However, there is only so much the market will make up in a short period of times and continued large decliner days will just make recouping these losses harder.  With those losses, Wall Street will be looking to take their ire out on someone.  It can’t be the Democrats who, as much as they don’t want to support the investment community, knew it was right for America to support the bailout.  They came through and delivered the votes.  No, it’s the Republicans who are going to have to explain to their economic base that Pelosi’s words or an unrelenting ideology kept them from voting for this package.  If they can pin this on Pelosi (who I still blame in many ways for this mess today), then they will have been able to fool – not the average American who doesn’t understand what’s happening – but Wall Street (who are not your common fool that falls for political rhetoric).

But one might make the point that the reason they couldn’t support the deal was their ‘real’ constituency has been complaining nearly 100-to-1 against the deal (don’t forget, the Democrats were getting the same hate mail).  Here’s the problem.  First, there are a lot of Americans who don’t understand what’s happening and are looking to the President, the candidates, and Congress for direction and leadership – they didn’t get it today.  Second, people are against this deal because they don’t understand how it will affect their daily life.  That’s a bit understandable.  However, as loans continue to get harder to get, people start losing their jobs at a more rapid rate, people continue to lose their homes, wages continue to go down, their investments continue to lose value, and their banks fail – they are going to change their opinion of this deal very quickly.  The potential risks of not doing this deal are very real and will be very evident when they occur, most likely sooner than later.  Washington Mutual failed last week, Wachovia this week, there are rumors of another bank on the brink.  As more and more of the middle-class are touched by these events (or even hear about them) their opinion will change.  When it does, the Democrats will be exonerated in voting for this bill and the Republicans will once again prove they do not have the interests of the Country ahead of theirs.  I do think their leadership tried to get this to pass, but they either didn’t have the will or power to make it happen.

See, in a lot of ways the Republicans have just let the Democrats off the hook.  If the bill would have passed, in theory, money would have loosened up a bit and people wouldn’t feel the pain that this bill avoided.  People would continue to wonder if this was nescessary or not and the Republicans could have continued to attack the Democrats on having an itchy trigger to get something done.  Even if a bill gets done later this week and voters forget, Wall Street will not forget about the 1trillion dollar worth of losses.


2 Responses

  1. Why does anyone care what the minority party thinks? If this bailout bill is good for the country the Democrats could pass it without a single vote required from the Republicans. Why is it that Pelosi could not get 12 Democrat congressmen to change their “NO” votes to yes?

  2. Mr. Liberal Crab…credit to you for at least mentioning the 100 to 1 constituents against. Once again, you did not mention the real reason….nothing in the bailout for borrowers. Here is the real scoop:

    Coverage of the non-passage of the proposed bailout bill in the house was tainted by the apparently general desire of media to take the Investor/Trader/Wall Street perspective only. Few in the media are going into what the house members were specifically hearing from constituents. No discussion that the new legislation specifically left borrowers and borrower relief completely out of the bailout. In taking on this kind of reporting perspective, the media is not doing it’s job. The media needs to dig into the story of how borrower relief (those citizens holding the toxic ARM loans) has been successfully opposed so far (and by whom!). This opposition has proceeded without any in depth economic analysis of the benefits of borrower relief to real estate prices, consumer spending, and the overall economy. Unfortunately, the short answer to why major media seems to be avoiding this is that the Wall Street investor class has determined that whipping consumer borrowers as long as they can in toxic loans, and then running them out of homes quickly via foreclosure so they can get the ‘asset’ back into a rigged system, is going to produce their best returns. And yet these same people demand a bailout funded by taxpayers, many of whom are stuck in the toxic loans. Shame on major media for not telling this story! Get on it and try to restore your credibility.

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