Wall Street deals in money, politicians in votes and that’s why the House of Representatives, Democrats as well as Republicans, rejected the US government’s $700bn Wall Street bailout plan yesterday.
Many congressmen and women face re-election in November and they’ve been listening harder to the voters on Main Street than to their so-called political leaders.
US voters, faced with losing their jobs and their homes, don’t see why their money should be used to bail out feckless bankers, even though the consequences of not acting may be even worse for them.
As it happens, the government and regulators are pressing on with the sticking plaster while all this is resolved, engineering the sale of America’s fourth-biggest bank Wachovia to Citigroup.
In Europe the UK’s Bradford & Bingley mortgage bank has been nationalised as has part of Belgium’s stricken Fortis. Two German mortgage banks have also been carved up.
So by the time the emergency package is eventually passed much of its purpose may have been achieved piecemeal.
In the meantime Asian and European stock markets are headed south with everyone waiting to see what happens on Wall Street, where the Dow Jones fell 700 points yesterday, when it opens later today.
Sooner or later there’ll be buyers at these levels, particular with oil and food prices falling and thereby helping to slay the inflation dragon (at least temporarily).
There’ll surely be more interest rate cuts in the US and, more than belatedly, in Europe too. In the UK the Bank of England has been asleep at the wheel, fretting about inflation while the economy goes into reverse.
In the US George Bush has been addressing the voters again although one wishes he would shut up. He may have a broad back but it’s a bit like that of General Custer. No use to anyone as it’s stuck full of arrows.
As for weary treasury secretary Hank Paulson, he may have done a good job but, to many Americans, he’s still, as former boss of Goldman Sachs, one of the fat cats who’s the problem rather than the solution.
Mr Blatherskite reckons the bailout will be passed and markets will recover slowly. The economy will turn as well, maybe sooner than we think.
But, just in case, he’s laying in the tinned food and looking to downsize to a log cabin.
[Image Attribution: Fletcher6]