The Senate is going to vote on a slightly modified bailout plan tomorrow. It's going to pass easily. I'd love to cross reference "no" votes on Monday versus Members up for re-election. Can one of you do this for me, please? If it's not closely correlated, my name isn't Orville Redenbacher.
My point is that the people up for election needed to show solidarity with their beleaguered constituents, which they did by voting "no" for the appropriate reason - either that it was a bail out of Wall St. fat cats or that it smelled like teen socialism. Now that that's out of the way and the talking heads have had a day to play that story, the Senators can come in and do the 'sensible' thing and sell us down the river. But now we'll be happier about it, and they can face their voters.
The Street is going to eat this up and send the markets sky rocketing.
A year from now, the root of the problem will still not have been addressed and we will be witnessing the Latin American Credit Crisis, Part 2. Only this time it will be those stinking Norte Americanos whose credit no good, vato.
At its root, this is not a crisis of confidence, this is an asset bubble pure and simple. Housing prices got overheated for a number of different reasons certainly led by ridiculously easy access to credit. American housing is just about as big a category of business as you will find in the world. What's bigger? Bass fishing? Porn? Anyhow, the train that is American housing pulled this huge web of interconnected stuff, none of the components of which had any real history of working in normal economic circumstances. What needs to be remembered is that there are in fact a few hundred million Americans who need to live somewhere. The underlying assets have value, they just don't have a lot of liquidity right now, and that makes their value hard to judge. There's little doubt that they are headed below their 'rational' value, if that makes sense, the question is really how far above their rational value when the pieces of the web all came together.
The politicization of this whole episode has been pretty shocking. This is showing one of major failures of current American partisan and special interest based politics - that the people elected to act on your behalf, because the interests that have the power to get them elected are so narrow, don't have a whole lot of experience serving America. They are better at serving Americans than they are at representing America. Hopefully that all makes sense in the way I meant it to.
Whoever becomes President, I don't envy.
Cynical enough for you then?