The $700 Billion Oopsie

By Randall Hoven

There was one single time in the last two years when the Republicans should have listened to Senate Majority Leader Harry Reid. That was when he said of the credit crisis thingy, "no one knows what to do."

Republicans enjoyed that little slip of honesty. They contrasted themselves with the "do nothing, know nothing" Democratic leader by showing they knew what to do: spend $700 billion as quickly as possible to buy bad debt from banks. It was a crisis. It had to be done quickly. Doubters had to be bribed or publicly denigrated. We would end up tacking $150 billion in spending sweeteners to get it passed. John McCain would sacrifice his Presidential bid to save our country with the bailout.

Treasury Secretary Paulson convinced President Bush of the need for the bailout. President Bush then convinced Senator McCain and many other Republicans in the Senate and House. (A majority of Democrats were always convinced. We're talking hundreds of billions of taxpayer dollars, Republican approved, being spent as quickly as possible. That was like announcing "free beer" in a fraternity hall.)

But funny thing, the guy who started this all, Secretary Paulson, now thinks that, er, buying bad bank debt won't work. Worse, he's not really sure what will.

From Yahoo Finance:

Paulson has effectively abandoned the idea of buying bad debt from banks. While this is a step in the right direction, it's an amazing 180-degree turn in a few short weeks.

It's also clear that Paulson still doesn't have the answers ... and maybe not even a clue, which he unwittingly admitted today: "And to adequately reform our system, we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us," he said.

The result of the whole thing, politically and economically, is analogous to New Orleans after Katrina. Yesterday (Nov. 19) the S&P 500 closed 26% below its October 1 close. Markets around the globe suffered similar losses. Businesses are holding off on normal transactions, waiting for the next bailout shoe to drop, thus causing a real recession.

And John McCain, who was leading Obama in the polls after choosing Sarah Palin, decided to go into panic mode over the bailout. In one fell swoop he showed that he (1) follows President Bush like Barney the dog, (2) publicly agrees with Barack Obama on the major issue of the day, and (3) will browbeat fellow Republicans to vote against their constituents' wishes (coming in at about 99-to-1 against the bailout). He immediately fell below Obama in the polls again, never recovered and lost the election handily.

And what do we hear now from Paulson, the man who started it all? "Oopsie!"

But it's OK now. The burden of what to do with the remaining $400 billion or so will fall to President Obama's incoming Treasury Secretary. I somehow think he'll have some ideas of what to do with it.

We need a new term for just how stupid and self-defeating something can get. I suggest "Republican stupid."