Regardless of what side of the issue you come down on, whether you backed the bailout bill or were against it, yesterday's resounding defeat of the bill does have something to it that should make every American very happy. In that vote we saw a very clear example of how members of Congress actually work for the taxpayer.
Constituents and Political Games Equal Bailout Failure
There were two reasons for the failure of the $700 billion Wall Street bailout bill. One was a barrage of angry phone calls from constituents who stated their opposition to the bill. It seems that the American people were not happy with the idea of giving people with that much personal responsibility for the mess (Paulson, former CEO of Goldman Sachs, Dodd and Frank who were instrumental in creating the problem in the first place—the list goes on and on) the money and authority to bail out their Wall Street pals. No, the people did not like that at all and they let their representatives know that.
That, however, did not kill the bill. It died on the Democrat side with the partisan political games played by House Speaker Nancy Pelosi. Leave aside for a moment the vitriolic speech she made just prior to the vote. That may have cost Republican votes, but those votes were not necessary. The Democrats are a clear majority in the House, they have all the votes they need to pass whatever they want. So, why did 95 Democrats, including five of Pelosi's committee chairmen, vote against the measure?
Primarily, they did it for the same reason the Republicans did: Their constituents were angry and in a week or so these valiant public servants were going to have to face them. There was, however, another reason. Speaker Pelosi told them they could. She knew the American people didn't want this bill, didn't want to be saddled with all this excess debt, didn't want the Secretary of the Treasury to have this much power and she knew that her party's candidates would be in trouble in the next election for voting for this. She knew all this and so she let them off the hook while browbeating House Republican leaders who, in their turn, browbeat their members to make up the difference so she could claim bipartisan support.
So, once again, the Republicans approach an issue of grave importance to the nation as if they are taking their marching orders from the people and trying to solve a problem, while the Democrats approach the same issue as a partisan political game to be won for the good of the party.
What This Means for Your Business
The biggest effect that you are likely to see is in the credit that your company—and the companies you do business with—will receive. Banks are not lending to one another and so they are not lending to businesses and consumers. Edward L. Yingling, president and CEO, American Bankers Association, said in a statement that: “There can be no doubt that the freezing up of the world’s credit markets and the loss of confidence we are seeing will, if left unchecked, dramatically impact consumers and businesses of all sizes.”
Obviously, you would imagine that if your company has sterling credit, none of this should affect you. You would be wrong. Credit issuers are already pulling back, lowering credit limits, and people and companies with great credit are suffering behind it. Right now, until we see what the Administration and the Congress are going to do, probably the best thing you can do is to try and stay a step ahead of the game. So, contact your credit issuers and find out what they are planning to do, how they are going to protect themselves as the crisis continues. This will likely mean penetrating the executive suite to get your answers, but it will be worth the effort.
The Bottom Line
The idea of Wall Street relief isn't dead. The idea of propping up failed companies led by avaricious top executives holding court over a swarm of myopically ambitious corporate drones is still with us and is likely to surface again later this week once Congress comes back from celebrating Rosh Hashanah. The question is only in what form the next bill will appear. Will Pelosi pull it sharply to the left? Will she allow it to shift to the right? Will it be a buy-out bill like the one that failed or will it be a loan bill to help Wall Street work its own way out of the crisis? Will it keep Mark to Market accounting, which a growing number of experts blame for creating this problem, or will it scrap it?
We don't know. They don't know. It is up to you to protect yourself. It's up to you to develop a plan.