The House doesn't meet again until Thursday, so the question now is: What do the markets do? (I write this minutes before they open.) If they continue to fall, or at least not to post any improvements, then I think Matt's scenario is right: We'll probably see a new vote on a substantially similar bill to the one that failed yesterday. One option that is talked about -- and supported by Barack Obama in a statement today -- is raising the FDIC insurance limit from $100,000 to $250,000 to help protect the deposits of individuals and small businesses. The statements says Obama will be urging Congressional leaders to include the provision in the legislation; the Democratic candidate also has a new ad out touting his economic plan. It's not a specific response to the crisis but it sounds like he is finally hitting on the narrative so many progressives have been crying out for.
Meanwhile, Steve Benen has some ideas about where the legislation is going, although he is correct that there aren't too many people in D.C. or anywhere else with a clear idea about what's next. While he's right that passing a more progressive bill with the Democratic majority sounds nice, the politics don't look easy, as Ezra discusses here: There are simply too many Blue Dogs and Dems in shaky districts who wouldn't vote for such a bill to get you a majority.
For McCain, the politics are extremely tricky. This AP analysis is devastating:
As the bailout plan appeared ready for passage Monday in the House, McCain bragged that he was an action-oriented Teddy Roosevelt Republican who did not sit on the sidelines at a moment of crisis.
The implication: that he played a critical role in building bipartisan support for the unprecedented bailout.
Within hours, however, the measure died in the House mainly at the hands of McCain's own Republicans.
On a conference call last night and in public statements, his campaign has been blaming Obama for the failure of the bill (not, interestingly, a charge the Obama campaign has made in reverse). It's not a narrative that makes very much sense, even by the very loose standards of the Republican campaign, and the media doesn't seem to be buying it. In a statement this morning, he said, "It was 95 Democrats that voted against it." Uh, what? 133 Republicans voted against the bill, nearly 67 percent of the caucus -- especially galling after the GOP promised that they would provide 90 votes and failed to come through. Blaming the Democrats for this loss is such a ridiculous lie that, well, hell, I'm not surprised at all McCain would say it.
Today, he joined Obama in expressing support for increasing the FDIC insurance limit to $250,000. McCain also called on the Treasury to immediately begin spending money to purchase toxic assets, using $250 billion from the exchange stability fund or $1 trillion from ... somewhere. (I'm going to have to find out where that $1 trillion is coming from, and why Paulson didn't use it in the first place.) He's still claiming some kind of success -- "Though we failed yesterday, even though I went back and was able to get more Republicans on board or help get more Republicans on board, we will go back to this" -- but is doubling down on supporting Paulson's unilateral authority to purchase these assets, apparently without Congressional oversight. It's an interesting decision in light of the revolt of conservative Republicans against precisely this idea yesterday.
The final question: What if the bailout doesn't turn out to be needed, or at least not as fast as Congress had been asked to believe? If the markets don't collapse, if we don't see a credit crunch, and the government can inject liquidity into the market through the Fed, then the rationale for the emergency bailout will lose a lot of steam, and may hurt its proponents politically. David Cay Johnston continues to raise this question, suggesting that that politicians and the media have created too much fear and demanding a new process. Most economists, however, seem to think some action is still necessary.
-- Tim Fernholz
