Bailout: stampede

I'm fascinated at how most of the media, from Fox to MSNBC to the networks, were stampeded into believing that the idiotic $700 billion -- plus another $120 billion in what congresscritters might have considered "sweeteners" but should taste sour to ordinary taxpayers -- "bailout" bill passed yesterday by the House was either necessary or particularly useful. Perhaps the only thing more idiotic is the mantra you hear everywhere, that the crisis was caused by deregulation. As I noted in some detail last week, the only deregulation that occurred was the repeal of the Depression-era Glass-Steagall law, (in 1999, signed by Clinton) which prohibited banks from doing both commercial and investment bank activities. The institutions that got in trouble were pure investment banks -- Bear Stearns, Merrill Lynch -- while those that took advantage of the deregulation -- JPMorganChase, BankAmerica -- came out in a fairly strong position, and were able to buy troubled institutions, relieving taxpayers of the obligation -- or what our invincibly ignorant betters inside the Beltway would have viewed as an obligation.

The only action that might help was the decision by the SEC to lift the rigid "mark to market" accounting rules that were triggering a downward spiral. Many think this will be enough to arrest a credit crisis -- that, by the way, had not yet developed into a crisis, given that lending, including mortgage lending, was actually up in the middle of September over last year. If the crisis is arrested, however, most people will give the bailout credit.

To add to the silliness (one has to scoff to keep from crying), people talk as if the taxpayers might even make a "profit" on the deal. That's unlikely, but if it does happen, do you think actual taxpayers will see a penny? Of course not, because it isn't the taxpayers but the government that will be buying these toxic assets, and if they end up reselling them for more the money will go to the government, not to us. Delusion and self-delusion all around.

And the stock market tanked after it was done. Of course one-day declines are not necessarily indicative, but it sure didn't suggest widespread confidence that it is going to "rescue" us. Nice that libertarians were almost the only ones expressing the voice of the people on this issue, but sad for the country that it seems nobody listened.