Business and Politics: Fiddling while Wall Street is burning
Story by Chris Graham
A funny thing happened on the way to John McCain riding in on his white horse to solve the Wall Street crisis – the horse was late, and by the time McCain got involved, they’d had the crisis solved without him. And then a funnier thing happened – when McCain finally did get involved in the high-level talks, something suddenly got gummed up in the works, and Democrats and even a key McCain supporter are suggesting that it was McCain.
South Carolina Sen. Lindsey Graham said late last night that McCain has joined House Republicans in opposing the proposal that had been agreed to in principle by the Bush administration and Democrats in the House and Senate earlier in the day that would have resulted in a phased-in investment of $700 billion from the federal treasury to buy up risky securities with provisions for improved oversight of the implementation of the program proposed by the Bush administration last week and a strategy for phasing in the second half of the $700 billion investment in stages after giving the Treasury Department basically free rein over the first $350 billion.
McCain appears to be on board with an alternative House GOP proposal that would instead of having the government buying up the mortgage-backed securities that are at the heart of the Wall Street crisis have the feds set up an expanded insurance system financed by private banks that would rescue individual home mortgages. Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke have said that they had already considered and discarded a similar idea as being ineffective, and White House spokesman Tony Fratto said the White House is “not convinced that it does what needs to be done for the banking system.”
The next thing that happened as a result of the inaction apparently brought on by the hijinks is not at all funny. The news breaking this morning is that one of the largest banks in the U.S., Washington Mutual, has collapsed under the weight of its bad mortgage debts and has failed. Federal regulators seized the Seattle bank’s assets late Thursday and sold them quickly to J.P. Morgan for $2 billion. The Washington Mutual failure is being talked about as the biggest bank failure in U.S. history.
In a statement on the Washington Mutual failure released this morning, McCain seemed to tip his hand regarding the bigger Wall Street bailout that is still on the table. “I am committed to working with all parties of good faith in both houses of Congress, the administration, and among Democrats and Republicans to reach an agreement to stabilize our financial markets. We can do so in a timely and effective fashion while protecting the taxpayer from excessive demands on their strained checkbooks. It is our obligation to restore the confidence of Americans in these valuable institutions, and demonstrate to taxpayers that Washington will be capable of addressing great national problems,” McCain said.
That statement was released at 9:08 a.m. this morning. Barack Obama released a statement at 11:38 p.m. Thursday addressing the Washington Mutual failure that similarly tipped his hand. “The government-brokered sale of Washington Mutual is the latest sign of the perilous situation facing our financial system and our economy. Although Americans with deposits at Washington Mutual should rest assured that they are safe under this arrangement, the failures of our financial institutions threaten economic instability, jobs, and the incomes of American families. This is a time to rise above politics for the good of the country. We cannot risk an economic catastrophe. This is not a Democratic problem or a Republican problem – this is an American problem. Now, we must find an American solution,” Obama said.