Will Sens. Obama and McCain Claim a Piece of this Rotten Fish They Helped Produce?
Congress passed the $700 billion Wall Street bailout on Friday, supported by both Senators John McCain and Barack Obama. The U.S. stock market promptly dropped. Over the weekend the financial crisis threatened European banks, and stock prices across Asia and Europe tanked.
So much for the argument that the bailout was necessary to calm the markets.
Yet, while politicians were putting the taxpayers ever more at risk, we have seen the possibilities of a market work-out. For instance, Warren Buffet invested $8 billion in investment bank Goldman Sachs and manufacturer General Electric. He imposed tough terms, but he has solidified the financial futures of those two firms.
Both Goldman and Morgan Stanley won permission to become bank holding companies, allowing them to accept deposits along with increased regulatory oversight. Last month, Bank of America spent $50 billion to acquire Merrill Lynch, which had unloaded its bad mortgage backed securities in the summer, well before Congress stepped in.
Even more dramatically, a bidding war has broken out between Citigroup, which had been tapped by the Federal Reserve to save troubled Wachovia bank, and Wells Fargo, which jumped in with an unexpected $15 billion purchase offer. The two are now battling in court over the right to buy a bank seen as financial road kill only last week.
There is much more to be done to clean up the economic mess flowing from the housing market crash, but the ill-considered federal bailout is likely to slow the process.
Companies now will run to the Treasury Department before taking tough steps to clean up their own balance sheets. After the automakers joined insurer AIG and investment bank Bear Stearns in winning their own federal bailouts, what company will not expect a handout from the taxpayer? Who will bail out Uncle Sam when all of his bills--well over $100 trillion in unfunded liabilities--come due?
Far from bringing change to Washington, the election of either Sen. Obama or McCain would mean more of the same: More political interference in the economy; more special interests running government economic policy; more taxpayer bailouts; more politics as usual.
Only a vote for Bob Barr and the Libertarian Party would offer genuine change for the future.