Robert Kuttner at The American Prospect says the House Repubs may have made serious tactical error in failing to deliver on their promise to Speaker Nancy Pelosi to deliver 80-90 votes for the bailout package.
In refusing to provide enough votes to enact a bipartisan bailout bill, Republicans may well have done Democrats a favor. The Democratic leadership gave up several provisions that their members wanted, including more relief for homeowners. But the Republican leadership took the position that they had extracted all they could get, and GOP House members were now free to vote their consciences. In practice that meant listening to the uproar of constituent backlash against a bill that did much for Wall Street and little for the common American. So the easy Republican vote was 'No.'"
He goes on:
Republicans can talk like Roosevelt, but when it comes to legislating it is hard to imagine them out-Roosevelting the Democrats. People in both parties are now talking about some variation on Roosevelt's Reconstruction Finance Corporation, in which the government gets an equity stake in an enterprise that it bails out. But the Republican version is likely to be more of a giveaway to Wall Street — mocking the right's rhetoric. As I have been arguing, the entire Paulson approach was flawed. The Democrats were mistaken to try to add some bells and whistles to a concept that was bad at its core.
The Democrats should write a bill that includes:
- An RFC-style agency to have the government take over or take major equity positions in failing banks.
- Direct refinancing of threatened mortgages, on the model of Roosevelt's Home Owners Loan Corporation
- Extension of FDIC guarantees — and standards — to other financial institutions, with government takeover if they fail.
- A small transfer tax on financial trades to pay for a lot of the cost of recapitalizing Wall Street.
It was Winston Churchill who observed that you can count on Americans to do the right thing — after they have exhausted the other alternatives. This could be one of those times.
Since the Democrats are the majority party, the White House, Hank Paulson, and the supplicants on Wall Street may now face stronger medicine. They can thank the Republicans for that.
In other words — it may be time to stop fooling around and pass some genuine progressive reform. As long as we're gonna' have to clean up the mess caused by the market fundamentalists, why not really clean it up?
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