Blowing Up In Their Faces

by Steve Soto

There are many among the center-left blog community that are severely disappointed at the news that the leadership of both parties endorsed the bailout plan late this afternoon. I understand the frustration, and think it is warranted given that the problem was dumped upon the Democratic congressional leadership by an administration and House GOP caucus that was seeking a political advantage from this "crisis".

Having said that, let me throw several things in:

People far smarter than me on finance and economics felt that something needed to be done this week to unclog the credit markets.

Second, the McCain/House GOP gambit blew up in both their faces over the weekend. The package that Weepy John Boehner just endorsed at the Capitol bears no resemblance to what the House Republicans threw on the table last Thursday night to sidetrack the talks. McCain and Boehner got almost nothing out of the deal: there are no regulatory or capital gains tax mortatoriums in the final package. It's an total smackdown of McCain's claim that he added leadership here, because he has no fingerprints on this deal and yet the House GOP leadership has now signed on.

Third, all the House GOP and McCain accomplished was to make it easier for congressional Democrats to insist that Wall Street will be collared after five years by Congress to pay up if the taxpayers are out any money. The final package is far better than what Paulson originally proposed, and yet the House GOP and McCain ended up soiling themselves without being part of the solution.

The Gallup tracking poll now shows Obama extending out to an 8-point lead over McCain, and it seems McCain has paid a price for "suspending his campaign" and then disappearing from the scene of any final solution. The ultimate victim here will not be the American taxpayers, but the McCain campaign.

Update: I have no doubt that dozens of House Republicans and Democrats from tight districts will game this for political advantage and vote against the package, but in the end this could split the Republicans. They've been able to win elections over the last two decades by conning the sheeple to vote for them on social issues while being bankrolled by the Wall Street wing for the plunder the GOP delivers to the wealthy in this country. So how will it go down this week with their benefactors when they see dozens of Republicans pander to the far right wingers and vote against Wall Street? Yes, this could provoke a schism in their party.

Does that make the Democrats now the party of Wall Street? No, because Pelosi will still release a good number of them to vote against the package. But the rupture inside the GOP from this botched faux populism, coupled with an imploding McCain campaign, could really marginalize the GOP as an extremist party.

I suspect the votes will be close, but this will pass, and the Obama administration will ride herd on Wall Street over the next four years.