Monday, September 29, 2008

Blowback from Main Street

One way or another, enough constituents got to enough C0ngresscritters to defeat the $700 billion bailout. It took most of the Beltway crowd by surprise. This piece by Steven Pearlstein of the WaPo, published this morning -- and especially the headline, "Dr. Paulson's Tough Medicine, In a Pill the Public Can Swallow -- exemplifies to me the rather complacent and self-satisfied approach of most Beltway commentators. It wouldn't have cost taxpayers anywhere near the advertised $700 billion, he assured us, because Treasury would be buying troubled mortgages and instruments that would turn out to have some value. The wise rulers in Washington were saving Wall Street from itself and saving Main Street, and Main Street shold be grateful.

Well, Main Street wasn't and isn't grateful. Most Americans still don't fully understand the extent to which this mess was made in Washjington, but they have an inkling, and they're a bit sick of having ever more of their money seized to fix messes created by politicians and their friends. Interestingly, Nina Easton at Fortune caught a bit of the anger in her piece.

The expectation is that they'll tweak it a bit and come back with something essentially similar. Instead, they should hit restart and understand that more government intervention is not the solution for a problem caused by too much government. They could start by repealing "fair-value accounting" or mark-to-market, which I discussed earlier. Then cut Fannie and Freddie into bitty pieces and sell them to the private sector in such a way that they get no access -- zero, zilch, nada -- to taxpayers' funds ever again. That's for starters.

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