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Tuesday, September 30, 2008

The Bailout: Anatomy of Failure (The Inside Baseball)

When it is all said and done, there will be plenty of blame to go around. Members of both parties will share responsibility for the failure of this bailout. Furthermore, the entire nature of the bailout is likely the biggest culprit. In other words, this was a bad bill, hastily done, and more than anything else, that's why it failed. Yet, in my opinion, the biggest villain without it even being close is Nancy Pelosi. Her behavior regarding this bill is an epitome of everything that is wrong in D.C. She played a duplicitous, cynical and hypocritical game full of political calculation and never once did she put the fate of the country above her own political power. That said here is how things broke down.

I was struck from the beginning at the behavior of the Democrats. While they have blamed President Bush for everything including this crisis, it was amazing how much deference they gave to the plan. Despite their bluster, from the beginning, they went along with most of its premise. They were always in favor with the basic philosophy of the bailout. It's like they blamed Bush for the crisis and then wanted to give him the authority to fix it. All their changes were either ridiculous, non sensical, or cosmetic. Trying to fund ACORN through the bailout was ridiculous. Attempting to put union reps on the board of failed companies was non sensical, and limiting CEO pay was cosmetic. That's about all they offered to the process.

Republicans, on the other hand, were against the plan on wholesale philosophical reasons from the beginning. They didn't believe that bailing out bad investments was the right way to fix things.

As such, by midweek the message from Capitol Hill was a very confused one. Depending on who you listened to a deal was imminent, dead on arrival, or a long way away. As such, John McCain made a bold move on Wednesday. He suspended his campaign and planned on returning to D.C. to help get a deal done. This appears to have frightened the Democratic caucus which was totally freaked out that he could get any credit for moving the process. This appears to have set the stage for a hastily made "deal" at about noon the next day. McCain hadn't arrived yet, and he was about to meet with the President in a bi partisan meeting hours later.

This deal didn't pass my sniff test from the beginning. Speaking for the Republicans was one
Robert Bennett of Utah. I am political astute enough to know that 1) I've never heard of him and 2)that means he can't be all that significant. If he was in the Republican leadership, I would have at least have known his name before he stood up to represent the Republicans in this deal. Hours later my suspicions were corrollated as one leader after another spoke out against the deal, Richard Shelby, John Boehner, and Mike Pence to name three.

Then, came the fateful meeting at the White House later in the day. Only those in the room know what happened. Here is what we do know, 1) it was contentious and confrontation, 2)Republicans who weren't included in prior discussions spoke out vigorously against the agreement and 3) and in many ways most important, Barack Obama was the de facto leader of the Democrats in the meeting. After this meeting, it was clear there was no deal. Yet, anyone that could read between the lines knew that there wasn't really a deal to begin with.

Now, the Democrats who failed to strike a deal prior to McCain's arrival began to pivot. They began to blame McCain for derailing a deal that was never really there. McCain, for his part, made a series of missteps that will likely cost him the Presidency. First, his campaign decided to get involved in partisan fingerpointing. His campaign put out a statement bemoaning the partisan nature of the process. He would have been much better served putting out a statement explaining that the legislative process is messy, lot's of heated things are said in the middle of battle, but that he was committed to seeing the process through and that he would spend the rest of the weekend on Capitol Hill making sure this deal was done.

Then, he was spooked by the Democrat's accusations and he stopped showing up on Capitol Hill. Instead, he made a series of phone calls from his office. Whatever he did to move the process along, no one will know it because he did at arm's length. Finally, at the debate, rather than jumping on the Republican's pro free market plan, he muddled through an answer about bi partisanship. Rather than hanging the bailout around Obama and the Democrats, he jumped aboard a bad policy full of bad politics.

Meanwhile, back on Capitol Hill, Democrat and Republican negotiators were busy NEGOTIATING. Meanwhile, Speaker Pelosi was busy poisoning the waters. Over the weekend, she accused the House Republicans of being unpatriotic for not showing up to negotiations earlier in the week. Of course, this was the height of hypocrisy and duplicitousness. The reason they didn't show up was because they weren't invited by Pelosi herself. Meanwhile, her caucas was engaged in heavy handed tactics. At one meeting, scheduled to be two Republicans and two Democrats along with Treasury and Bernanke, the Democrats sent in an army of nine to negotiate with only two Republicans.

By just after midnight, on Sunday morning, a deal had been struck, but this was tenuous at best. The philosophy of the bailout was still in place. Most of the rank and file Republicans were totally opposed to such a structure. Meanwhile, there was nothing in the deal for Main Street which would be a difficult sell for Democrat rank and file. Now it was Minority leader Boehner's turn to show a lack of leadership. In presenting this deal, he once referred to it as a "stinker", and to say that he tepidly supported it would be a massive understatement. With that "ringing" endorsement, the rank and file needed no more reason to oppose. Meanwhile, Mike Pence renewed his objection and made this statesmanlike statement.

Our nation has been confronted by a serious crisis in our financial markets. The President and this Congress were right to act with all deliberate speed in addressing this crisis.

We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?

Economic freedom means the freedom to succeed and the freedom to fail.The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy.

Republicans improved this bill but it remains the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American people. I cannot support it.

Before you vote, ask yourself why you came here and vote with courage and integrity to those principles.If you came here because you believe in limited government and the freedom of the American marketplace, vote in accordance with those convictions.

Duty is ours, outcomes belong to God.We have fought the good fight. Now we need to finish the race and make sure that posterity and the American people know there were conservatives who opposed the leviathan state in this dark hour.

And if you do this I promise you, I will stand with you and, I believe with all my heart, the American people will stand with you as well.

As such the battlelines were drawn, either follow the half hearted leadership of Boehner into a deal he himself believes is a "stinker", or follow the passionate leadership of Mike Pence. Gee, I wonder why most Republicans stood up against the deal.

Meanwhile, Nancy Pelosi's political opportunism was now going into overdrive. She was hoping to hang the crisis that lead to the bailout around the neck of Bush and the Republicans. Furthermore, she would do everything to minimize the number of Democrats that would vote for the bill hoping that Boehner would pull his weight. As such, we learned from Congressman Defazio that he wasn't whipped. In other words, the Democratic leadership never counted the votes and did little if nothing to twist arms. As it turns out, multiple committee persons and multiple folks from California voted against this measure. It appears that Nancy Pelosi couldn't get members of committees she assigned them and members of her own state to vote for this bill.

Finally, she added the final poison pill with this speech.

This partisan speech attempted to lay the blame for the entire crisis on Bush and the Republicans just before the vote. Here is how Megan McArdle described what Pelosi was attempting to do.

She then spent a week openly and repeatedly blaming the Republicans and the Bush administration for the current crisis. The way she set things up, it was "Heads I win, tails you lose": vote for the deal and I'll paint you as heartless reactionaries bailing out your fat cat friends. If you're going to do that, you'd better make sure you have some goddamn margin for error in your own party. She didn't. Then she got up and delivered yet another speech blaming the Republicans for the bailout deal she was about to pass.

Now, Republicans then blamed the speech and Democrats called Republicans whiney children. Both characterizations are much too simplistic. Any Republican that would vote for the bailout would do it holding their nose. By delivering that speech, Pelosi was laying the groundwork for using that very vote against each and every one of them. Now, imagine you are a rank and file Republican. You don't like this bill. Even if you are voting for it, you aren't sure it is a good idea. Then, you see your political opponent attempting to use your vote against you for naked political purposes. Why in the world would you then vote for it and commit political suicide?

Meanwhile, Barack Obama has spent the entire process in full political mode. He has calculated that he needs to be as far away from the process because he most likely believes getting too close will hurt him. Today, we learned that he called exactly ZERO House Democrats. That includes a lack of phone call to four Chicago area Democrats that voted against the measure. He's never even really taken a position. Meanwhile, he sends out statements demanding that something pass. He has becried the process from the beginning. Yet, he's done nothing to get his hands dirty in the process.

All of these things combined together proved doom for the bill, and in my opinion, good riddance.

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