For my first post, I thought I'd talk a little bit about the proposed Wall Street bailout.
With the bailout bill not passing, I can say I am very disappointed. I am a Republican, but this time the majority of my party was on the wrong side of this issue. The Republicans, sticking up for main street, made an error. Although this deal is very unpopular on main street, this is one time when the public just doesn't have the knowledge to understand the problem. House Republicans should have listened to experts instead of the public and made the right choice
The Republicans in the House said they voted against the bill because they didn't want to leave their children with a bill for $700 billion. This just illustrates how many politicians don't understand finance. The $700 billion wasn't an expense like the War in Iraq or entitlements such as medicare or Medicaid. It was an investment in sophisticated securities that are widely thought to be undervalued. The government would have gotten a large portion of it's money back, possibly even more than it invested.
Also, the $700 billion wasn't all going to be available immediately for the treasury to work with. Only $250 billion was going to be available immediately, while another $100 billion was going to be granted with the president's consent, while the rest would rely on congress's approval. That's right, half of the money that would be granted later on would rely on the same congress that said it wasn't willing to risk or "spend" that much money.
Even if all of the $700 billion was spent and taxpayers never saw a dime of that money come back, the bill would have been worth it. CNBC reported today that the total value lost in the stock market was $1.4 trillion, while the proposed plan was only $700 billion. The value lost in the stock market cost twice as much as the proposed bailout.
The cost of not doing a plan would be enormous. Numerous fixed income money managers have stated that the commercial paper market has pretty much dried up. (For those who don't know, commercial paper is a short term loan used by corporations that is not back by any assets, but by the reputation of the company.) Commercial paper is critical for companies to operate day to day. Sometimes companies have money when they don't need it, and sometimes they need money and don't have it. This is what the commercial paper market facilitates. If this market dries up, business in America will literally come to a screeching halt.
Loans for main street will not just be more expensive to get. They will be impossible to get. This includes mortgages for homes, auto loans, loans for college and money borrowed for countless other purposes. If the average person thinks that this is just a Wall Street problem and they there is no way this will affect them, they are dead wrong.
All of these issues affect everyday Americans. From the lack of ability to get loans to the decline in the value of their 401-k's. The House Republicans need to recognize this, even if their constituents don't. They need to get a bill passed and I hope they work to get this done as soon as possible.
