Here’s a depressing way to end the evening.
The Wall Street Journal is pessimistic after today’s vote. So am I.
Both he [Bernanke] and Paulson gave the politicians and Main Street too much credit. They have behaved too calmly, and too rationally for the nation to get the message.
Bernanke and Paulson should have made outrageous promises at the hearings and argued there is no way this will cost the taxpayer $700 billion, that the taxpayer will in fact make money. That works much better on the American psyche. America loves buying lottery tickets. Think of the bailout as a lottery ticket with much better odds.
Perhaps the greater failure by Bernanke, Paulson and President Bush was a reluctance to scare the hell out of people. A leader shows gravitas and concern, not panic. But, perhaps, a little panic wouldn’t hurt. Because you get the sense that Main Street is so busy being angry, that it isn’t sufficiently frightened. The public still doesn’t connect their lives to the crisis. But it should.
Because no bailout bill means that:
By the close of the stock market on Monday, the value of Main Street’s IRAs, 401Ks and pension plans will be worth a lot less than on Friday. How much? Hard to say, but a loss of 20% isn’t crazy.
By week’s end, there is a good chance that a raft of large banks will be taken over by federal regulators.
Within two weeks, as the banks hoard cash, the credit lines on most of Main Street’s credit cards will be reduced, foreclosure proceedings accelerated and car-leasing programs suspended.
Within a month, Main Street won’t be able to buy a home, a car or a tractor unless paid for in cash. As the credit markets shutdown, the mortgage, auto and small-business loan markets will nearly disappear. And the economy will grind to a near halt.
Far fetched? Not at all. It is the absence of credit–not too much of it–that causes great economic depressions.
Okay,that’s too gloomy to end with. Try this sober but ultimately reassuring article by another WSJ columnist.