You can get the info on the fact that the Bailout failed all over the place, so I am not going to cite the info for you… what I am going to do instead is talk about why it failed and what happens next.
First, why…
Well, when the bill was submitted, it was sold to the public in the wrong manner.
Yes, in politics you have to “sell” ideas to the public first, so that people aren’t unhappy with your decisions and vote you out of office.
Instead of harping on the “if we don’t do this” negatives for the banks, they should have talked about the positive things that the bill would have done for the average person, but because it was framed in the worst way the initial reaction from the public amounted to 200 million people saying… “Oh, hell no. You are gonna bailout Wall Street fat cats?!?!”
Once the initial reaction passed, the pulic began begrudgingly to accept that the bill was gonna happen, even though they were none too pleased… and then the Democrats politicized the hell out of it.
Reid called out McCain, so McCain called him on his bluff and headed to DC. Reid then backpeddaled when Obama decided to stay on the trail. Bush said ”oh hell no, you are not gonna callout my boy and then sit on the sidelines” and ordered Obama back to DC too. Pelosi began bashing the Republicans saying that the Democrats bear no responsibility what-so-ever. Obama led some talks, apparently poorly, that ended up in shouting matches. Democrats began to rail against the “failed Republican economic philosphy” when in actuality, the Dems bear as much responsibility as the Republicans, the Banks and, honestly, the people that took loans they could not afford or did not understand.
And then the Democrats started earmarking the bill… for organizations like ACORN and it’s subsidiaries.
The blogosphere and the Republicans gave a unanimous “WTF? Oh, hell no! You are not giving 20% of the profits to ACORN!” This then filtered up to the mainstream, and then the public got jittery once again, and I don’t blame them. Earmarking the damn Bailout bill for an organization that is complicit in the subprime crisis, is registering Democratic voters and is under investigation for voter registration fraud in a very large number of states… this is not the way to win over Republicans.
It is because of these fumbles in handling the bill starting with Bush, and then with the Democrats that the bill was doomed to failure.
The optomistic estimates were that it was going to be close, but it was not. At all. As a matter of fact, the estimated 40 Democrats that were going to vote against it turned into 90+.
The blame for the bills failure certainly cannot not be lain at the feet of the House Republicans as Democrats comprised about 45% of the Nay votes, but I am sure they are going to try to spin it that way. As a matter of fact, many in the House are laying the blame squarely on the shoulders of Nancy Pelosi and her alone.
So, it failed… now what?
Well, there will inevitably some sort of bill that comes out. The new iteration will be either massively larger or significantly smaller… my guess, unfortunately, is larger.
Also, in the meantime, the stock market is going to continue to freak out. My guess is that we are going to see the Dow drop below 10,000. This is going to have the interesting effect, considering the circumstances, of pushing down the yield on the 10 year bond.
The reason the yield on the 10yr bond is significant is that mortgage rates tend to follow it, so as the yield drops, it is very likely that mortgage rates will too… and if the yield hits the floor, and rates follow, then there is going to be a mini-refi boom and very possibly a run on housing currently on the market. I mean, if rates drop to the low 5′s or even high 4s for 30 year fixes… all those houses on the market with their depressed values will start to be snapped up… investment companies will not be able to resist.
Another thing that I would not be surprised to see happen is that the Fed might just drop rates another quarter in the next few days and open up borrowing capabilities for even more banks at cheaper rates.
If these two things happen in tandem… the market may correct itself… if there is a swift enough reaction from the Fed and the banks can hold on for a few weeks longer.
We are looking at some razor thin margins here and who knows what might really happen, but just because this bill did not pass does not mean that there is a death-knell sounding yet.
Either way, this is going to be a close call… we shall see what happens, but if rates drop significantly and oil prices continue to slide as they did today, then we may not need the bailout at after all.
Filed under: General Politics, Mortgage Bailout | Tagged: Bailout, democrats, Republicans | 10 Comments »
