The $700 billion Wall Street bailout bill passed today and was signed into law. Dr. Doom is still predicting the apocalypse. And Krugman is not confident that it will work. Surprise, surprise.
Like Digby, I have my own deep-seated doubts informed by Naomi Klein's excellent book The Shock Doctrine. The game is a simple one, just wait for a moment of crisis (say, a terrorist attack or an economic meltdown) to enact a series of radical, right-wing policies that would get any politician tarred and featered in the normal light of day. It was used to great effect in Augusto's Chile, then exported across the globe for the next 30 years.
Recent examples of Shock Doctrine in America would include the immediate aftermath of post-Katrina Neo Orleans, and of course, the Iraq War. These crises are always used to push through radical privatization and redistribution of wealth to the very top, at the expense of everyone else. It's far closer to an organized crime heist ala The Sopranos than legitimate policy.
The Paulson proposal was firmly in that vein. At less than three pages, the bailout plan would give the Treasury secretary vast new powers in overseeing vast sums of the taxpayers money, with no questions and no oversight. That idea was shot down and considerably modified by the Democratic Congress, but by all accounts, the core of the plan is still there. I honestly don't know whether the new safeguards and checks will be sufficent to prevent abuse and further erosion of our democratic system of government, but I've long since learned never to take anything for granted when Bush and the GOP are involved.
The larger economic question to the $700 billion bailout is whether it will even work. The general consensus seemed to be, "we don't know." Maybe buying off bad debts will clear space and give banks confidence to begin lending again. Then again, maybe it won't. The real punch line of this scandal is that no one truly knows how much bad money is out there. No one knows. And that's why the financial world has been freaked out for the past year. Now they are in near panic, and our solution is to throw an enormous sum of money at Wall Street and maybe...maybe it will work.
I really don't know why the Democrats stuck with the Paulson plan, instead of beginning from a blank slate on a more progressive proposal. No doubt they've been scared stiff with stories of imminent doom and financial collapse. Problem is, we've all heard this scam before. Even bigger problem is, we really are in a crisis. Dr. Doom wouldn't be warning of the total collapse of the shadow banking system if he didn't believe it.
I really get the feeling that nobody in charge really knows what's happening, or how this will all play out. The $700 billion bailout might buy us some time, or it might ease problems in the short term, or it might just prove worthless. One thing is for sure, and we all know it: this won't be the last. There will be more massive taxpayer bailouts. You can bet on it.
The choice between Obama and McCain couldn't possibly be more stark. Obama ran out in front and took charge of this situation, persuading Congress, pushing for needed improvements to the bill, and educating the public on the causes of this crisis, and where we will need to go. The vaunted Obama Cool (that phrase should be trademarked) helps tremendously, especially when compared to McCain, or worse, Bush. Has George Bush ever appeared more pathetic and small? Even he knows he's finished. Pray he just crawls into a bottle and hides for the next four months.
Obama better have a good plan for getting us out of this mess. I fear that this bailout and the ensuing financial crisis will hamper his agenda considerably. I also fear that this bailout was the right's latest Shock Doctrine; but we knew all along their goal is to wreck the machine so thoroughly that it never works. Making government fail is the bread and butter of the modern conservative movement.
We're going to need as much Obama Cool as we can get.