Bush finally acts after the wolf eats Wall Street

By MARTIN SIEFF

Published: Sept. 19, 2008 at 10:51 AM

WASHINGTON, Sept. 19 (UPI) -- The wolf is no longer at the door of Wall Street. The wolf has eaten Wall Street.

President George W. Bush's last 100 days in office have just seen the biggest intrusion of the federal government into the private sector of the U.S. economy since the first 100 days of President Franklin D. Roosevelt's New Deal 75 years ago.

A panic-stricken U.S. Congress, whose Democratic and Republican leaders alike hitherto have not raised a finger to avert the looming financial storm, will meet next week to rubber-stamp the tidal wave of interventionist legislation that Treasury Secretary Henry "Hank" Paulson and his team are working on day and night to keep the financial system of the United States afloat.

Details of the plan remain vague, but basically the government will buy distressed assets to restore stability to the financial markets. Some analysts are already comparing it to the Resolution Trust Corporation that was set up in 1989 under the Financial Institutions Reform Recovery and Enforcement Act to deal with the Savings and Loan meltdown. Others are comparing it to the Reconstruction Finance Corporation set up by President Herbert Hoover in 1932 to pump liquidity into the markets.

The plan also addresses two recent complaints: the ad hoc nature of U.S. government action so far to address the crisis as implemented through the Treasury and the Federal Reserve; and the sidelining of Congress.

Obviously, conservative Republicans do not like using this amount of public money to bail out private companies: They understandably ask why the U.S. taxpayer should pick up the tab for others' bad choices.

The problem with this argument, however, is that if the U.S. government does not intervene, U.S. taxpayers inevitably will pick up the tab in other ways -- as citizens, consumers and employees, they will all be plunged into sudden impoverishment if the system is left to crash and burn.

The revelation of the latest unprecedented bailout reassured the financial world -- at least momentarily. Dow Jones ticked up on the news, as did global stock markets. However, with a candor that could be interpreted as either refreshing or terrifying, Paulson and Federal Reserve Chairman Ben Bernanke told congressional leaders that there was no guarantee the proposed plan would succeed in creating stability.

There are, however, already some hopeful signs that things may be bottoming out -- there are, after all, only two investment giants left to fail on Wall Street anyhow. California home sales have started to rise, and Warren Buffett is buying selected stocks he thinks are undervalued.

But there should be no doubt that something epochal has happened, even if the latest round of bailouts succeeds in financially stabilizing the financial world: The days of cheap money on demand and limitless loans are over. Paulson and Bernanke already have succeeded in convincing congressional leaders that a huge protection scheme is needed. And they have extracted a promise from Senate Majority Leader Harry Reid, D-Nev., and Speaker of the House of Representatives Nancy Pelosi, D-Calif., to pass legislation regarding the plan by the end of next week.

It is almost unprecedented to get Congress to move that fast on anything, especially to approve a plan crafted by an administration of the opposite party to the one that rules both chambers on Capitol Hill. Reid and Pelosi, furthermore, gave that approval before they could even have seen the legislation they were promising to pass, because it hadn't been fully written yet.

This upheaval is bound to have a huge impact on the presidential campaign: In the short term, it has propelled Democratic presidential nominee Sen. Barack Obama of Illinois narrowly ahead again, after several very good weeks for Republican nominee Sen. John McCain of Arizona. But both candidates, as we have often noted before in these columns, will now have to abandon their obsession with vastly boosting government spending -- Obama -- and dramatically slashing taxes -- both of them.

Both campaigns certainly will have to drastically rewrite their economic platforms to take this into account if they have any thimble of intelligence, integrity and national responsibility left to them.

After all, the wolf has just eaten Wall Street.

https://www.upi.com/news/issueoftheday/2008/09/19/Bush_finally_acts_after_the_wolf_eats_Wall_Street/UPI-63781221835893/print/