Atrios prophesized it last week. He said the Republicans in the House, like Lucy playing football with Charlie Brown, would pull away the football at the last moments. Now, it does indeed look as if Pelosi and Hank Paulson each played Charlie Brown to the Republican Congressmen's Lucy.
So the Dow tanks and investors rush to...government backed Treasury bonds. Wall Street has spoken: "We value the government more than our private financial institutions." Think about this the next time someone tells you our T-bills are worthless and how wrong it was for the Social Security Administration to invest in T-bills.
One interesting question is how far the Bush administration will go to appease progressive critics of the bailout proposals. Will the Busheviks allow Democrats to add more pro-homeowner provisions, including the bankruptcy law changes that would let judges rewrite mortgage payments and percentages, for example? I also admit to wondering, two weeks after the crisis began, whether we might not be better off without any plan at this point--and just have the government buy assets of these various companies if they filed for bankruptcy. I italicize wondering because people I find credible, including Warren Buffett and Paul Krugman, continue to say some bailout of these companies, before any further bankruptcy filings, is necessary.
Politically, Obama needs to maintain support for more progressive bailout conditions (and he has been admirable in this regard), combined with prudence about what is happening among the congressional leadership of the Democratic and Republican Parties. I beleive we should also let McCain/Palin continue to warn Americans to "swallow hard and go forward" with a bailout. McCain can obviously change on a dime, however, and the corporate media is not likely to hammer him for yet another flip-flop.
What makes this time politically charged, and therefore very interesting to me is that we now see that the Republicans in Congress have thrown the Bush administration, and now McCain, under the bus. They would rather do nothing and burnish a particularly demogogic popluist sort of rhetoric which they hope to use to hold onto their seats. These Republicans are primarly performing political calculations, not primarily acting from principle.
ADDENDUM: Dean Baker went past mere wondering and opposes any bailout that is not geared directly to help homeowners. Sounds reasonable, and really, if Republicans are not on board, then the Dems need to go economically populist all the way, meaning revive a New Deal spirit. Congressman Dennis Kucinich (D-OH) asks the correct public policy questions, and let's note, too, that Kucinich opposed the bailout proposal today.
On the other side of the political aisle, Congressman Darrell Issa (R-CA) impressed me with his idea for a special bond issuing that would be paid for with initial private investors, with US government backing. I am not happy about this idea as the risk is still too great without reward for taxpayers, but it's an improvement in Republican thinking since their last proposal that called for cutting capital gains taxes--as if the problem is that the homes are appreciating in value and there would be capital gains taxes owed. Oy. For those not public policy minded, the reason the proposal to cut capital gains taxes makes little or no sense is most properties are worth less than the loans, so there is no capital gains, and hence no tax. Cutting that tax just helps people with other interest income from other sources.
Final comment: It looks like the "blame Pelosi" balloon is fizzling, especially if one actually reads the rather tame speech she made. That is also what impressed me about Issa. I saw him on Chris Matthews' show on MSNBC this afternoon, and Issa said nothing about Pelosi's speech nor did he blame Pelsoi. Instead, he talked about his proposal and that he had not even spoken with McCain. At one point, though, Issa ripped into Paulson, saying Paulson was no banker, but only a "day trader" from Goldman Sachs. Ouch. But, sadly, Matthews proved his own shallowness by ignoring Issa's more reasoned points, and focused instead on personal politics.
Speaking of politics, as opposed to public policy, one thing is certain today: The Paulson plan is dead and the Democrats have no business reviving it. Also, the Republicans are going in various directions at once, are not following McCain's lead, and are willing to rip into the Bush administration. I agree with Digby that the time is almost overripe for Democrats to find their inner FDR and prepare a truly pro-homeowner proposal. Readers of mine know that has long been my mantra, so it is nice to see Digby reciting that mantra today...