What Was Congress Thinking?

As I have been writing, the Bailout Plan is just a band-aid but a little plug in the dam is better than nothing. I consider the credit crisis to be the worst economic situation anybody reading this has seen in his/her lifetime; so why would Congress decide today was the day to stand on ceremony and make this new Government Fund a political issue?

The result was a Dow dropping almost 800 points, commodities falling off the cliff, and the credit markets remaining in disarray. The VIX, a volatility index which measures fear in the market, closed at 46.72. A couple of weeks ago it was around 20 and it is close to the high on 9/21/01 of 49.35. The result was massive selling in all markets as people wanted cash and as much liquidity as possible. Indiscriminate selling, as we saw, usually creates value but some Bill needs to pass to stem the downward tsunami. The Bill had to pass as a first step to unfreeze part of the mortgage market and allow banks to begin lending again. Upon a Bill passing, I expected the stock market to head south after a brief rally as the dire economic situation will become the market's focus; but without a bill, the recession will accelerate, the credit crisis will get worse, and main street will suffer for many years to come.

It looked like there were enough votes to pass this Bill until Nancy Pelosi decided the vote needed to have an equal amount of Republicans as Democrats vote yes. Withholding Democratic votes at a time when Main Street America needs this Bill to pass more than ever has to be one of the worst political maneuvers in all time. What ever happened to country first and politics second.

I believe a Bill will be reworked and get passed before the week is out or we may be headed to the Great Depression II.