The Senate is scheduled to vote on the bailout bill later today and, in an attempt to make it more palatable, it will be loaded with amendments. Energy tax credits for Democrats, capital gains tax reductions for Republicans. There's new impetus for moving forward on a variant of the bill that failed so spectacularly in the House on Monday - those folks on "Main Street" that House Republicans swore they were protecting watched what happened to the stock market on Tuesday and backed away hard from all those deeply held beliefs in free markets and Darwinian natural selection economics.
There's now lots of motivation in Washington for passing legislation that moves the ball forward. But I don't really believe the story that the nay voting House members were so virtuously acting on behalf of their constituents - jeez, when have they ever listened to them before? 70 or 75% or Americans have wanted the U.S. out of Iraq for the last four years. About the same number believe abortion ought to be legal and available. Some 80% wanted the minimum wage to be raised. None of that public opinion influenced House Republicans - I reckon they're blowing smoke and looking for cover when using public opinion as an excuse for voting against the bailout bill.
But anyone watching the stock market yesterday and feeling like things are OK is fooling themself. A 500 point day. Yeah, great. It's that "dead cat bounce", bargain hunters. Not some measure of the health or robustness of the economy.
The issue all along has been the availability (or lack thereof) of credit. And while the Dow looked terrific yesterday, credit availabilty went nearly to none. Municipal bonds are, essentially, unavailable. Overnight bank lending rates have doubled and banks are reluctant to loan to other banks. These are the metrics that the evening news doesn't show. I suspect many sighed in relief yesterday watching the Dow, but it's a lack of credit availability that will cause the real pain.
The result; a panicked reaction from Congress that doesn't address all the issues and is laden with unrelated gobbledygoo to entice votes from nonagreeable members of Congress. Will it work? We should all hope so.
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