On Friday, the stock market was having a great day, rising 300 points in the morning. However, since the point when the bailout passed, the market has crashed, falling a combined 800 points Friday afternoon and Monday.
Congress caused the stock market crash with their vote. The market lost faith in the plan, stocks continued to fall as the banking system failed to restart normal operations.
The saddest part of this whole saga is that somehow, people’s confidence in Democratic presidential candidate Barack Obama to manage the economy has risen. This economic disaster has been a bipartisan disaster from start to finish: Democrats and Republicans have made equally dreadful decisions.
For example, Democratic Senate leader Harry Reid, in sharp contrast to the calming tone we expect from politicians, set off a panic last week.
Reid stated, “One of the individuals in the caucus today talked about a major insurance company. A major insurance company — one with a name that everyone knows that’s on the verge of going bankrupt.”
Well, excuse me Mr. Reid, not everyone knew this; in fact, your comments were a major shock. Shares of insurance companies such as Hartford and Prudential fell up to 50 percent last week following your harebrained remarks. Now everyone is paranoid, no one knows which insurance company it is that is nearly bankrupt and the entire insurance industry is reeling from Reid’s statement.
In times like this, paranoia kills companies. Whenever a company’s stock drops sharply, people stop doing business with the company, and it ends up dying, regardless of its underlying strength.
This was Bear Stearns’ and Lehman’s fate, and Mr. Reid’s comments will quite possibly directly cause the bankruptcy of an insurance company like Metlife, Hartford or Prudential.
Taking out companies hitman-style is not new news. Democratic Senator Charles Schumer was responsible for the collapse of the Indymac Bank earlier this year with some ill-spoken words. I haven’t heard Schumer apologize for putting all those employees out of work, nor has Reid apologized for his little faux pas that threatens tens of thousands of American jobs.
Aside from running their mouths, Democrats have had their hands in this financial crisis in other ways. For instance, let’s look at the now defunct Fannie Mae and Freddie Mac mortgage companies. For decades, they were run in a relatively stodgy and conservative manner.
However, in 1999, the Clinton administration urged these companies to make more loans to poor people who couldn’t afford houses. Fast forward nine years and all those new loans Clinton had facilitated ended up defaulting, taking down these venerable companies. America, after bailing them out, is now saddled with $5 trillion of additional national debt due to Clinton’s bad judgment.
As I noted previously, Obama took in large campaign contributions from these failed firms; however, Obama’s lack of economic sense doesn’t stop there.
For instance, in a bitter mockery of his “change we can believe in” motto, we’ve seen Obama faithfully tow Bush’s economic policy line.
While Obama has criticized McCain for voting with Bush, now we see Obama voting for every bailout Bush proposes.
Obama has also said that after he is elected, he might keep on Treasury Secretary Paulson. Paulson is the dumbest of President Bush’s supremely unqualified cabinet members – no small achievement.
Why doesn’t Obama want to get rid of Bush’s stupidest henchman? Even more fundamentally, why doesn’t Obama oppose any of Bush’s failed economic policies?
We need leadership out of Obama, yet all we get is him sheepishly voting to follow Bush’s policy of giving away your money to Wall Street’s fat cats.
It seems that Obama is perfectly happy with the corrupt status quo; he certainly isn’t voting as if he’ll bring “the change we need.”
Ian Bezek is a junior economics major. His column appears Tuesdays in the Collegian. Letters and feedback can be sent to firstname.lastname@example.org.