Wednesday, October 01, 2008
Stand and Fight, or Lose
I am confused by John McCain's behavior regarding this whole economic bailout fiasco. The $700 billion dollar package failed, and well it should have as it would have been a huge step towards socializing our financial system. America has prospered partly because we have a free market economy and I believe too much over sight by the government would undermine that. The financial companies took a gamble by making junk loans, partly because the Fed forced them via an affirmative action like policy which required a certain number of mid to low-income recipients on their books, and I think also due in part to the housing market bubble making them a bit too aggressive.
However we got here, whether you want to put all the blame on one institution, party, individual, etc, we need to do what is right going forward. To me, "right" is letting the market self-correct. This has already started to happen: one of the warnings we had a couple weeks ago was that banks would start to falter, and that would mean the beginning of "the end". Well, the first part of the scenario has indeed happened, as evidenced by Washington Mutual (speaking of junk loans) failing. How did the market react? J.P. Morgan Chase stepped in and purchased them, which should have zero impact to the customers (like me) of WAMU. All WAMU assets are now secured by Chase Bank and the FDIC, so all is well. So the market has so far adjusted for this, and I believe it will continue to do so as companies in trouble continue to get bought out by companies with the capital to do so. Consumers so far seem less affected by all of this activity in terms of their confidence in the market. Whether this is due to complacency or just blind trust in the market is debatable, I suppose.
I also believe John McCain trusts the free market, which is why I am befuddled by his statements of late that the bailout is the way to go. He put his campaign on "pause" and vowed to go to DC and do his part as Republican leadership to get a deal done. Good start, and the polls showed that Americans, the same ones who 2 to 1 are against shouldering the burden of failed financial institutions who used bad business practices, agreed and supported him. He then claimed "victory" before the actual vote tool place and looked inept as it did not pass as expected.
Legislators are now working on bailout II, and plan to vote again Thursday. Now is McCain's opportunity to side with the American people and conservative principles and work to pass the Republican's answer to this, which would mean loans and insurance to hurting companies that would bolster consumer confidence and still keep responsibility where it belongs. John McCain should be familiar with the notion of standing and fighting according to principle, given his military background and reputation as a "maverick".
I believe the alternative to this is to agree with the Democrats and Obama, which is basically to disagree with the American people, which could be the beginning of "the end" for the McCain campaign for President.