It's truly amazing how politics can stifle efforts to plug the bleeding U.S. economy. To the surprise of many, the much anticipated approval of the $700B Emergency Economic Stabilization Act of 2008 didn't happen. An agreement was not reached contrary to the much publicized forecasts made by both political parties over the weekend. Each of them wants to prevent the other from taking credit for this bold move to prevent a meltdown of the U.S.financial markets. With the presidential elections just around the corner, this is politics at play!
Both the Democrats and the Republicans know that a bail-out is necessary. The country has been bleeding for along time now from the bubble burst effect triggered by the mortgage industry subprime crisis. A government intervention in the form of a bail out is long overdue. The situation has placed the Democrats and Republicans alike in a classic "damn if you do and damn if you don't" type of a situation.
Could it be that the Republicans really waited this long before solving the crisis so they can use the issue as a political propaganda to boost the sagging popularity of their candidate?
Could it be that the Democrats intentionally remained passive about the issue since the Mortgage Industry's "bubble burst" happened earlier on so they can pin the blame on the Republicans and wrest control of the white house?
We may never really know. What I do know is that both parties are aware of the fact that something must be done to correct the country's financial woes immediately, because if nothing is done right now it will send the U.S. economy into a tailspin which will send the country and the the rest of the whole world into a long drawn recession. I believe the Democrats realize too that such a scenario will not be to their advantage even if they wrest control of the white house by November because by then the job of reviving the economy will be a herculean job and their white house residency may be short lived if they fall short of expectations.
I am sure by now both parties are trying to map out their own strategies to resolve the impasse. I even believe a solution will be had before the week ends. Each of them just want to make sure that the other will not unduly gain politically from the passage of EESA 2008. Already the stock market made the steepest dive since the last depression! Further delays may cause long lasting damage to the U.S. economy and ultimately the rest of the world.
Below is a short summary of EESA 2008 which amazingly, had to come from Xinhua, China's People's Daily Online (http://english.peopledaily.com.cn/90001/90778/90858/90864/6508590.html):
The following is the summary of U.S. financial bailout bill draft, which will authorize the U.S. government the largest financial intervention since the Great Depression.
I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to 700 billion dollars to the Secretary of the Treasury to buy mortgages and other assets that are clogging the balance sheets of financial institutions and making it difficult for working families, small businesses, and other companies to access credit, which is vital to a strong and stable economy. EESA also establishes a program that would allow companies to insure their troubled assets.
II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans many the result of predatory lending practices wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.
III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street's mistakes. The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. The legislation also requires the President to submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee on all financial institutions.
IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits "golden parachutes" and requires that unearned bonuses be returned.
V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury 250 billion dollars immediately, then requires the President to certify that additional funds are needed (100 billion dollars, then 350 billion dollars subject to Congressional disapproval). The Treasury must report on the use of the funds and the progress in addressing the crisis. EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary manner. It also establishes a special inspector general to protect against waste, fraud and abuse.