Who Voted Against The Bailout? Support Them!

New York Democratic representatives José Serrano, Kirsten Gillibrand, Maurice Hinchey, and Republican John Kuh voted against the bailout.

Please call or e-mail them to tell them to keep voting no!

• José Serrano,
• Kirsten Gillibrand,
• Maurice Hinchey, and
• Republican John Kuh.

Why should they keep voting no?

At this stage, I think the bailout complicates matters enormously, because the immediate problem is

1) Preventing further runs on banks and money market funds by extending deposit insurance.

2) Reviving the interbank market by placing the Fed as counter party and paying interest on loans.

3) Keep working capital loans rolling over until solvency can be assessed and workout recaps can be facilitated.

That's much more important at this stage.

The biggest problem with this bailout package it that it addresses the wrong problem with unspecified consequences.
It has be sold as protecting the people from the financial meltdown.

If it is posed as first the need to protect transaction deposits, and second to protect lending for current business operations and thus employment, then there are clear solutions that do not require a great deal of congressional for action.

The first problem is resolved by removing the deposits insurance cap and support for money market funds -- now done.

The second is to restore interbank lending by introducing now the interest on gross reserves (Bernanke has already requested this) and unifying the discount and Funds rate to have the Fed become guarantor of the market.

To restore short term lending to business, restore real bills lending at the discount window, increase the insurance fund to allow FDIC to aggressively resolve troubled insolvent banks, rather than fixing troubled assets

This should prevent the meltdown that Paulson is worried about.

Then the problem of the overall capitalism of the system can be approached later, hopefully with a Swedish style rescue. (Naked Capitalism Blog: Why The Bailout Bill Will Not Solve the Credit Crunch (And What Could)).

Unfortunately, Doing Something!!!! is clearly taking precedence over Doing Something That Might Actually Work.

Use this Who Is My Representative link (or Project VoteSmart) and call your representative right now. The bailout as it's current proposed is a bad idea that will only make things worse in the long run. The only measure worth taking is to protect depositors by increasing FDIC insurance limits. Everything else in the "Paulson Plan" is expensive snake oil (at best) and transfer of wealth by order of the government.

As for the proposed 'work-outs' for 'distressed' home-debtors? Tell your representative that those who borrowed more than they could afford, and those who lent indiscriminately to those people, the message needs to be: "Too Bad!!!". They took a gamble and they lost. This is classic Moral hazard, and it's wrong.

Finally, the Framers of the Constitution knew that jealousies among the branches of the federal government would slow the federal decision-making process, redounding to the benefit of the people and their liberty. As important as the Bill of Rights is, the structure of government is just as important for its bias against hasty government action.

Put aside what you think of the substance of the bailout issue as you see an example of the constitutional structure at work: