Oops--The bailout didn't stabilize the markets

When Congress debated the bailout package last week, plenty of respected economists argued that the bill would do little to fix the problems in the banking sector. However, others insisted we had to “do something” to avert a market meltdown.

Many people became reluctant supporters of the bailout because of the need to “do something.” Here’s how Tom Harkin explained his “yes” vote:

I reluctantly voted in favor of this bill because I believe our nation’s financial system faces serious challenges, and it is important for us to act.  However, I am under no illusions.  I firmly believe that Congress should not have been rushed into this action, but we needed to do something to calm the markets and restore confidence in our economy. While this package will do that in the short term, we must modify it early next year to strengthen and improve the rescue framework – and I will be leading the charge to do that.

Since George Bush signed the bailout bill into law, global and American stock markets have fallen sharply, with the Dow Jones industrial average now at its lowest point in five years.

The front-page headline on Tuesday’s Des Moines Register was apt:

Global markets plunge in response to rescue

Experts unsure what moves might restore confidence

But a week earlier, many of those “experts” insisted that disaster would strike if Congress didn’t jump on board the runaway train. Day after day, the Register’s coverage was slanted in favor of the bailout proposal.

The bailout was very bad politics, but that wouldn’t bother me so much if it had been good policy. Unfortunately, it is already turning out to be a very expensive non-solution to a big problem.

In the coming years, that non-solution will deprive us of the money needed for real solutions.

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  • Harkin copout

    If Harkin thought that Congress should not have been rushed into the bailout bill, why on earth did he vote yes. If he opposed the rush to bailout Wall Street then he should have stated so by voting against it.

    • I think he made a mistake

      If you read his whole statement, it’s clear that he voted for the bill because of the other things they added to it (the Wellstone Mental Health Parity act, various items related to flood relief for Iowans).

  • purpose of bailout

    The real purpose of the bailout as I see it wasn’t to stabilize wall street, it was to ease the credit crisis. It’s too soon to see if that will happen or not. That will take at least a month, maybe more.  

    • maybe so, but it was sold

      as a way to stabilize the stock market.

      My friends in small business are quite concerned about the credit situation, but credit tends to tighten up in every recession. Let’s hope things ease up by the end of the year.

    • It may do that but...

      The bailout may do that, only time will tell. The problem that I have with it is the fact that they didn’t take their time to debate the pros and cons. It seemed to me that the reason that it was passed was an attempt to gain some political points but showing they are doing something. Another problem that I had with it was all the pork that was added to it. This stuff shouldn’t have been in that bill if it wasn’t directly related to the original bill. All in all I would not be down on it so much if they hadn’t rushed it.

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