I am dashing this off quickly in response to the House vote rejecting the "bailout." Although what has happened is unclear, it appears from what I can gather from the Internet that the rightwing Republicans were the key to the bailout's defeat. One was quoted crazily as saying that the "bailout" would lead the economy "down the slippery slope to socialism, " according to the press.
The stock market has lost over 600 points, which means that tens of millions of people have lost thousands of dollars from their pension funds which are connected to the stock market. Also, I have received emails from left groups hailing this vote as a "victory" and calling upon me to write to Congress supporting it.
My my initial feeling is to say "a plague on both your houses." First, a bailout in any form would be an expression of state capitalism. This has nothing to do with socialism, particularly in this case, where the restrictions on capital that the administration is advocating is so minimal. A bailout to be acceptable to progressives must haven very different minimal conditions, like an immediate ban on forecloses, legislation repealing Gramm-Leach(which in term repealed the 1935 Banking Act's separation of investment banking and depository commercial banking) and provisions that will lift as much of the longterm tax burden for the bailout away from the people and onto capital.
The Republican right has brought this about through three decades of profiteering linked to deregulation. For the Republican right to pose as the "enemies of Wall Street" would be both a big lie and a grotesque joke.
There is an emergency, I feel, since a financial crisis of this dimension, if not checked by state intervention, has in the past led directly to a major depression, whose effects would be far greater than the cost of the bailout even under the conditions that are being put forward right now. But the bailout conditions are bad conditions that can be made much better through the kind of provisions that I have suggested, connecting the bailout to real reform, the way the the New Deal government sought to connect banking reform with progressive
taxation and labor and social legislation.
The votes for that kind of policy are not there by any means now, but the Democrats with the support of labor and progressives can make a start in that direction by changing what Bush and Paulson have given them and crafting much more progressive crisis legislation. Then, with a substantially increased majority and in an Obama administration, serious reforms can be enacted.
