Mutiny In The USA

It’s a crazy world. On Tuesday, German Chancellor Angela Merkel called upon the United States to get a bailout package for ailing banks through congress by the end of the week. That, she said, was the prerequisite for “creating new confidence in markets.” U.S. President George W. Bush didn’t angrily reject the request. He forced himself to say, helplessly, “We’re working on it.” What had happened? On Monday, the U.S. House of Representatives voted against the so-called Paulson plan, causing a shock in financial centers.

The result: devastating losses on the New York Stock Exchange, hysterical stock brokers, bewildered analysts and a U.S. President looking as though he’d been duped. The representatives’ rejection of Treasury Secretary Paulson’s 700 billion dollar bailout package for the decaying American banking system shocked not only Wall Street, it shook the entire economy. The Dow Jones index reacted to the defeat with a 7 percent, 777 point loss – the largest in its history. The Nasdaq and S&P indexes lost even more with 9.15 percent and 8.79 percent respectively. Those two track far more American companies and give, therefore, a more representative picture.

A majority of Americans appear to be of the opinion that Wall Street is getting exactly what it deserves and are therefore energetically opposed to saving it at taxpayer expense. Many representatives agreed with them because, like the President, they have to be voted in come November 4th. One-third of the Senators and half of the Representatives have to put themselves at the mercy of voters. That put a majority of Representatives next in line last Monday. In a remarkable revolt, 228 Representatives voted against saving banks with taxpayer funds, 133 of them from Bush’s own party. They were joined by 95 Democrats. Only 205 voted in favor of the measure.

Meantime, the blame game has started in Washington and lobbying to change minds has gone into high gear. A new, cosmetically modified bailout package will be voted on as soon as possible. Work on that bill is temporarily on hold for the Jewish holidays Rosh Hashanah and Yom Kippur. The word is, “it’s hard to say” when they’ll be ready to vote again.

Many financial experts are doubtful in any case. They think the bailout package doesn’t contain enough and will come too late to help Wall Street. Whether the House approves it or not, “the result will be the same,” experts from Money and Markets warned their customers on Tuesday. The credit crunch will spread and deepen. More banks will go under and the economy will sink into a deep recession. There is no escape. The fact that foreign banks are no longer willing to make even short-term loans to U.S. financial institutions can only accelerate the downward trend.