Bailout Has Been Changed to 'Rescue'
I doubt any decent bill that addresses our systemic problems as well as providing help for those who really need it can be passed in the current environment. However, some sort of stopgap bill is probably going to have to be passed just to get us to the first week in February. Obviously, the less spent the better.
Not surprisingly, the current crisis is bringing out the bottom feeders: Newt Gingrich is back in the news and is as eager as ever to dominate right wing authoritarians, too many of whom occupy seats in Congress. They seem to remember who got them there. Here's the Huffington Post:
Former House Speaker Newt Gingrich was working aggressively behind the scenes to defeat the Wall Street rescue plan minutes before he himself released a public statement in support of the package, NBC's Andrea Mitchell reported on Tuesday.
Yep, the same M.O. as usual—one has to give him that. Gingrich is one of the many reasons why we can't expect much seriousness from the House Republicans, though we still have to wait to see what the Senate Republicans will do.
A reader asked if there is a relationship between the credit crisis and the price of oil. The answer is yes and no. Because so many politicians, economists, bankers and corporate people don't fully understand the energy situation, the answer is largely no. These people do understand that large sums of money have been pulled out of the American housing market and its many faulty subsidiary investment schemes largely because overseas investors, mainly from Asia, need oil and are not just buying oil but trying to secure long-term sources which requires sizable investment in Africa and Asia. They do get that much. And they get that high oil prices are slowing down various sectors of the world economy (some understood it well enough to speculate dangerously and recklessly on oil). But they think of the current situation as temporary. And, in one sense, perhaps it is, but in the next twenty years we are likely to have an increasing number of these 'temporary situations' unless we recognize we have a problem and start dealing with it. So the answer is yes, but not according to those anesthetized by the usual market ideology.
In the meantime, the energy we need to run our economy still comes from oil. The oil industry, like any major business sector (well, more than most), has always had problems: oil spills, dry wells, production delays, refinery fires, financing problems etc. But we're entering an era where every problem is magnified much more than in the past. That is because the easy days of oil are over. We're in the hard days now. Here's the first of two stories from Rigzone:
As of September 29, 2008, 52 of the 3,800 offshore oil and gas production platforms have been confirmed as destroyed. Initial estimates are that the 52 destroyed production platforms produced a total of 13,300 barrels of oil per day and 90 million cubic feet of gas per day. Currently, MMS has no information on whether any of the destroyed platforms will be rebuilt by any operator.
Rebuilding platforms can be very expensive. Here's the other story:
From the operators' reports, it is estimated that approximately 57.1% of the oil production in the Gulf is shut-in. This shut-in figure for oil increased from yesterday’s figure due to operators’ errors in reporting for September 29, 2008. As of June 2008, estimated oil production from the Gulf of Mexico is 1.3 million barrels of oil per day. It is also estimated that approximately 45.7% of the natural gas production in the Gulf is shut-in.
Although it's not as bad as 2005 after Katrina, that's still a serious drop in oil production until everything gets back up (minus most of the 52 platforms). But I wouldn't want to guess whether oil prices will continue rising, falling or staying flat. Falling production usually means higher prices. But if the economy is sagging, that means lower prices. We're in an era of turbulence and turbulence at any moment is not easy to predict.
In the meantime, Washington has become a lunatic asylum so I'm not going to criticize the few sane people, almost all Democrats, who are trying to deal with an impossible situation. A real solution to the current crisis would require enough votes to overcome Bush's veto. Since a sizable proportion of House Republicans are stark raving mad and are perfectly willing to hold our economy hostage out of sheer spite, or because Gingrich said so or because Pelosi hurt their feelings, the Democrats are probably going to have to hold their nose on a ugly compromise of some sort just so we can reach next February with the economy reasonably intact. Here's some useful perspective from The Mahablog:
...from what I have read a large majority agree that the Administration’s basic approach is deeply flawed.No one should forget that this is Bush's bill offered just weeks before an election. Bush is, after all, the leader of the Republican Party and ought to be able to get his party to go along. His heir-apparent, John McCain also supports the bailout, or so he says when he isn't talking about how strong the economy is or how he needs to suspend his campaign so he can get his photo op at the White House. And needless to say McCain too is having trouble getting his party to go along. Do we really want these same Republicans back in January with McCain as president? S.W. Anderson of Oh!Pinion summarizes the situation rather well:
However, Congress more or less tweaked Paulson’s approach rather than try something completely different. They improved it mightily, according to many. But my understanding is that the smarter people in Congress figured the more conservative members would dismiss the smart approach outright. So instead of the best bill, they put together the best bill they thought they could sell to the right-wing troglodytes in the House.
And it still didn’t pass.
As Paul Krugman and others say, probably all that can be done now is to patch something together that will keep the economy limping along until a new administration and Congress is sworn in. And pray that will be an Obama administration, because McCain clearly is out of his depth on this issue and will be no better, possibly worse, than Bush.
So, the feeling among Pelosi and House Democrats yesterday was that if Republicans wanted a bailout, they should vote in substantial numbers to pass it, making the effort clearly bipartisan.
As the vote was held, Democrats saw many Republicans weren’t up for that. So, seeing no reason to stick their own necks out when Republicans wouldn’t, more and more Democrats voted against the bill as well. Thus, the defeat.
Today, House Democrats and Republicans are said to be working for a revised version of the bill, one that will attract the dozen or more additional votes needed to pass it.
House Democrats should explain their refusal to go out on a limb to benefit the Bush administration and Republican colleagues unwilling to do their own part.
House Republicans should put up or shut up.