The Eclectic One

…Because labels are a poor substitute for thinking

Bailout plan fails: Now what?

Posted by Bill Nance on September 29, 2008

The house failed to pass the proposed bailout plan for Wall Street today, followed shortly thereafter by a 700 point plunge in the Dow Jones Industrial Average.

The vote count can be found here.

My take:

I’m honestly not sure how to feel about this news. One part of me wants to pass the bill, as crappy as it is, to prevent even more damage to the economy.

On the other hand, I’m tempted to let the chips fall where they may and deal with the mess then.

The case to be made in favor of the bill seems to be that a lot of very smart people think the proposed bailout would inject enough cash into the markets and remove enough bad debt to get the market at least stable. Of course the problem with it is the same as the arguments in favor. Many economists are saying this plan wouldn’t really address the problem adequately and the government would be out $700 billion for no tangible result.

Of course the government can always do nothing. -At least for now.

What might happen as a result? Well, a lot of very large banks and brokerage companies could go belly up. This will hurt those with investments in those companies and the credit market, already very tight at the medium to large-sized banks, could pretty well come to a halt. This in turn would have large effects on other parts of the economy which depend on the availability of credit for their operations.

Still, that problem might be one that’s easier to solve, or at least promises to bear better results, than the current proposed bailout.

It’s a Hell of a situation, and no matter what course we take, it looks like we’re in for some serious economic pain. But the economy has tanked before, and eventually, it has pulled out again. It’s easy to say that when you’re well-situated. It’s a lot harder to take when you’re already struggling. Having been in both positions I can sympathize with both. But on balance, I wonder if the harm form massive debt being added to the current staggering amount won’t do as much harm as the crash the doomsayers foretell.

I guess we’re going to find out.

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One Response to “Bailout plan fails: Now what?”

  1. pedigree said

    Leaving the economy side of things out of it, what makes these companies any different from the thousands and thousands of small business that fail every year because of monetary mismanagement or poor sales. I dont see Governments bailing them out. The different here is that small business boss will go to jail whereab big bank boss will go to the Caribean with a 8 figure bank balance

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