Will 2008 be the year of the Chicken Little Congress? Or can the House of Representatives show the panic-driven Senate what it really means to be a deliberative body?
On Sept. 19, Treasury Secretary Hank Paulson put a gun to America's head: Pass his $700 billion bailout of the banking industry and give him unfettered new powers to buy up an ocean of privately held toxic assets, or all hell would break loose. Treasury officials warned that the market would lose a third of its value if the bill were not passed immediately.
"We could see falls of 3,000 or 4,000 points on the Dow," a Republican official heaved. "We may not have another day," Democratic Senate Majority Leader Harry Reid hyperventilated. "We can't afford to do nothing," echoed all the other Democratic Henny Pennys and Republican Goosey Looseys in Paulson's sway. It's a "crap sandwich," House GOP leader John Boehner sighed, but the costs of inaction would be worse.
On Sept. 29, the House refused to bite. The Dow dropped nearly 7 percent -- a "record fall" in points (778), but nowhere near the apocalyptic levels predicted by Paulson's fear-mongers. Half of that drop occurred before the bailout rejection. The skies, however gray, did not fall. The world did not end. The dire predictions of Paulson and company did not come to pass. The next day, stocks (their barometer, mind you, not necessarily mine) rebounded. We're about where we were in 2006. Stock market Armageddon? I think not.
Paulson's monumental misjudgment is no surprise to those who have paid attention to him over the last year. This is the man who proclaimed the subprime crisis "largely contained" in April 2007; "near the bottom" in May 2007; and "largely contained" again in August 2007. This is the man who pledged that he had "no interest in bailing out lenders or property speculators" in October 2007 and couldn't "think of any situation where the backdrop of the global economy was as healthy as it is today."
This is the man who patted himself on the back for refusing to "put taxpayer money on the line" to rescue Lehman Brothers on Sept. 15 -- and then turned around the next day and engineered the $85 billion taxpayer-funded bailout of AIG. This is the man who vowed he had "no plans to insert money" into Fannie Mae and Freddie Mac -- and then turned around and committed $200 billion in capital and credit lines to those corrupt, bloated, crumbling institutions.
This is the man who declared that "the worst is likely to be behind us" in May 2008 -- and then got down on his knees in front of Nancy Pelosi to pass a Mother of All Bailouts plan whose dollar figure was plucked from thin air. ("It's not based on any particular data point," a Treasury spokeswoman told Forbes.com. "We just wanted to choose a really large number.")
This is a man, in other words, whose crap sandwich should be taken with a huge grain of salt.
On Oct. 1, at the behest of Paulson, the Senate scurried to put Mother of All Bailouts 2.0 on the table. All but 25 members swallowed. The "world's greatest deliberative body" had no time to hold hearings, consider alternatives or study the history of similar failed bailouts around the world. The Do Something Now Or Else mob did, however, have time to quadruple the volume of pages and stuff the urgent emergency package with business-as-usual earmarks, goodies and sweeteners.
John McCain and Barack Obama both cited credit squeeze scare stories to rationalize the rush. McCain decried: "When small businesses and big businesses like Sonic [Drive-In burger] franchisees can't borrow … [i]t hurts the entire community." The rest of the story? Sonic clarified that "during the past year GE Capital provided less than 10 percent of the lending to its franchisees … in fact, many franchisees maintain access to other diversified sources of financing. Furthermore, Sonic has not received any notification from GE Capital, either directly or indirectly, that it will stop financing new loans to Sonic franchisees."
Lost in all the End is Nigh frenzy were dozens of local and regional headlines across the country reporting that, in fact, the end is not nigh: "Wall Street Credit Crisis Rings Hollow on Main Street"; "No credit freeze on Kern's Main Street"; "Community banks aren't yet feeling pinch of Wall Street meltdown"; "Farmers still able to get banks' loans"; "Small town Main Street doing better than Wall Street."
Instead, The New York Times obsessed about the drop in auto loan approvals over the last year -- from 83 percent in 2007 down to 63 percent. Catastrophe? No. If lenders are finally realizing they shouldn't give money to bad risks, why is that a bad thing?
Getting credit is not a constitutional right. Preserving home ownership should not be a government imperative to be pursued at all costs. The House faces a choice: Put the gun down and give our economic problems the time they deserve to get fixed -- or fork over untold billions to a thoroughly debunked Foxy Loxy and his den of wolves.