October 1, 2008 Comments

Democracy Prevails – Round 1

Last week I asked if democracy will prevail, and earlier this week it did.  The Economic Stabilization Act of 2008 was defeated in the House of Representatives by a vote of 225 to 208.  Although the Dow Jones Industrial Average suffered the largest point loss ever, I was pleased to see that the majority of House members listened to constituents and defeated the bill.  A lot of it probably has to do with the upcoming election, which is a big incentive for incumbent representatives to listen to constituents in order to assure reelection.  I suspect that eventually some sort of relief package will be passed, but it is good to see that Congress will take some time to draft a bill that makes sense.

I was watching the news last night and it was rather upsetting to listen to a member of Congress speaking about the issue in terms of what was taking place in the stock markets.  He spoke as if the purpose of passing the bill was to increase market value and restore losses experienced in 401k accounts.  Most politicians blaming are Wall Street for the woes in the credit markets, when in fact Wall Street has very little to do with it.  It is unsettling when those drafting legislation of such magnitude do not appear to understand that the securities markets and credit markets are two separate markets.

Politicians are quick to blame lack of oversight and immoral CEOs for what has transpired, when in fact it is really no one’s fault.  When capital becomes available as easily as it did over the past several years, one should expect a lot of lending to take place to the point where even unqualified individuals are receiving substantial loans that they are incapable of paying back.  If anything is to blame, it is the monetary policy of the Federal Reserve from several years ago.  If any government oversight should be put into place, it should preside over the actions of the Federal Reserve Board, not the banks.

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    • Andrew
      Thank you for pointing out this craziness of blaming Wall St. I have no personal interest in Wall St. or the people who work there, but it's amazing how few people see this as a fundamental problem with the availability of credit. It killed me to hear McCain say over and over in the 1st debate that CEO pay is the problem. Ugh.

      I really hope that they pass something reasonable, and soon. Time really is of the essence in this crisis.
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