The President’s credit rescue bill failed to pass the House, and it doesn’t look to me like any substantial bill could pass. Republicans seem to want to pretend there is no catastrophic problem looming, and too many Democrats resent Wall Street too much to do anything that might benefit a rascal. Without at least half the Republican House members, the bill won’t go, because the Democrats haven’t got the unity to muster every single member’s vote; if they try, the Republicans will vote against it in a block, just out of principle, and perhaps fear about getting re-elected. Against their own President, too.
Unless something changes, it’s sunk, and the Treasury and Federal Reserve will have nothing but weak measures to try to fight the trends. Interbank credit is already drying up. Commercial credit will be next, and if businesses can’t get working capital, that will initiate the mass layoffs. Every problem that comes up will put more pressure on real estate prices and mortgage repayment, and every click on that ratchet squeezes more banks. Washington Mutual is out; Wachovia is ready to fall; Fifth Third and National City are week and will drop if matters get worse.
Citizens don’t usually understand much about macroeconomics, and they don’t get the special role a banking system plays in a capitalist economy. Once things go bad enough, perfectly useful loans to businesses that have nothing to do with banking or housing don’t get made, and those businesses fold up. Life savings get liquidated; retirement is forgone. It could go on for years. The Great Depression lurched on for more than a decade, and only eased up in the second year of World War Two.
Everybody now is looking at the water boil through the hole in the bottom of the boat, and nobody wants to fix it because that would let the guy who made the hole get off without suffering. It would make sense, except everybody drowns together.
Anybody else think it’s this bad? Anybody think this is all just a crock, and that a mild recession is all we’re in for?
