Bailout bill passes Senate
74 Senators voted Yes, 25 No
Article added on October 2, 2008 at 10:30 Riga time; correction "25 no" added on October 3, 2008
  
In the evening of October 1, 2008 the United States Senate voted on the Emergency Economic Stabilization Act of 2008. 74 senators voted Yes, 25 No. Ted Kennedy, suffering from cancer, was unable to come to the Senate floor and vote.

39 Democrats, 34 Republicans and 1 Independent voted Yes, among them the presidential hopefuls John McCain and Barack Obama. 9 Democrats, 15 Republicans and 1 Independent voted No.

Secretary Paulson first arrived in Congress with a three-page plan asking for a blank cheque for $700 billion. The bailout, rebaptized “Emergency Economic Stabilization Act of 2008”, then grew to 110 pages, but was rejected by the House of Representatives. The bailout bill approved by the United States Senate on October 1, 2008 has grown to 451 pages. Sorry, but I had no time to read them all. I guess neither did the Senators.

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A “good” plan has not only to be a big plan, John McCain's influence seems to have been limited since the bailout is accompanied by a series of earmarks, ranging from wool research to film and television productions, from railroads and Indian tribes to auto racing tracks. Let's hope the House of Representatives has a closer look at them. To call a bailout a rescue plan is not enough even if, in fact, it is both, a bailout in the form of corporate welfare for mismanaged companies and incompetent as well as badly advised individuals, and a rescue for both companies and individuals who simply suffer from collateral damage from the mortgage and  financial crisis.

America loves hearings. Normally experts give their opinion on everything. For the $700 billion bailout plan, experts - in addition to Secretary Paulson and Federal Reserve Board Chairman Bernanke - were apparently not needed. The members of parliament are now all experts in finance.



It all started with Fannie Mae and Freddie Mac - as well as other companies ready to make a quick buck - giving mortgages away like donuts. The junk mortgages were later repackaged as secure securities and sold by Wall Street luminaries, banks and other financial institutions around the world. Individual and corporate greed and incompetence joined forces. The ones who acted responsibly should now pay the bill. The taxpayer is the ultimate save heaven for bad mortgages. The outrage around the country is comprehensible, but too many Americans have lived above their means for too many years. The quicker the moment of truth comes, the better. If the initial rescue package had passed, markets may have stabilized, but the problem would not have been resolved. To live on credit, on borrowed time, is no longer an option. America has to face the truth and adapt its spending to its financial means.

To do this under a Democratic administration with a Democratic Congress seems highly unlikey. In order to avoid avoid a “social-democratization” of the United States, voters should elect John McCain, because he is more likely to stop Congress from running to the left.

The Bush administration bears part of the responsibility for the current situation with its spending attitude. The budget is once again out of control. Before the mortgage and financial rescue package, a deficit of $410 billion was expected for 2008. Due to a mismanaged war, military spending went through the roof. In other sectors too, fiscal responsibility was an illusion.

Out of ideological reasons - “affordable housing” - Democrats blocked a reform of Fannie Mae and Freddie Mac when accounting irregularities surfaced a few years ago. John McCain was one of the senators asking for action to be taken. Nothing has happened. Both Republicans and Democrats as well as taxpayers share the blame for the current crisis. But the Democrats idea to add a $100 billion bill to the rescue package in order to sweeten the bailout may prove unwise. Voters are taxpayers. On November 4, they may cut down the expected large margin of victory of the Democrats in the House and the Senate. The Democrats' hope is that voters will blame the Bush administration. But they are not the only culprits. Some voters should also have a closer look in the mirror. They may find greed and incompetence there too.

If the current attitude persists, the $700 billion rescue will soon need its own bailout. Incidentally, nobody has a clue about how many bad mortgages, how many ill conceived loans are really around and how much it will cost taxpayers.

To flood the system with money is the right decision right now in order to avoid a collapse, a depression and a world economic crisis. But the underlying problems have to be resolved.

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We do not need gigantic companies that become too big to fail. Ordoliberal supervision is needed. A strong state - not a big state - that makes sure that no cartels and oligopolies emerge, that no price fixing, subsidies and protectionist measures distort the markets.

The bailout bill that passed the Senate was accompanied by $18 billion in incentives for alternative and clean energy, including wind, solar, electric cars, “clean coal”, biofuels and fuel-cell power. The world needs alternative and clean sources of energy. The best way to achieve this would be massive funds to allow fundamental research (Grundlagenforschung in German) which has first to be made in order to improve existing technologies and to develop new ones. The results of this research should be free to use be any company around the globe.

As for the financial crisis, Swiss private bankers have an unlimited liability, which makes sure they act in the best interest of their clients because it is in their own best interest. If you are liable with your business and personal assets, you will not buy junk mortgages for your clients. So far, I have not heard from a private banker going bankrupt because of the mortgage crisis. The future may prove me wrong, but if one goes down, he simply deserves it. Personal liability, a simple way to avoid excess of greed as well as future mortgage and banking crisis'.

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