I heard that strong emotions, anger, fear, euphoria, etc., are usually preceded by distorted thinking and the results of these emotions are usually unintended. We do things that we wouldn't ordinarily do if we knew the facts. I think that strong, unbending beliefs are based on distorted thinking too. Recent events prove my point.
I received a letter from Congresswoman Barbara Lee, my representative to Congress from California's 9th District. It was a nice letter thanking me for contacting her, in anger, with a strong suggestion that she get her "stuff" together after she voted "no" to the first $700 billion bailout package. What was she thinking, I told her. She should have supported the bill! The letter, prepared two weeks after the second bailout bill passed and with lots of hind-sight, is very well written and very respectful and gives the rationale for her first "no" vote and her second "yes" vote. The second bill, she says, contained the language, "...many critical improvements that will protect the economic security of all individuals, not just corporations on Wall Street...," in her words, that she could support. Not true.
The facts, I believe, are that she was shocked by the enormity of Paulson's proposal, as was much of the nation, including me, and she was afraid. She didn't know anything about the proposed bill, didn't know its impact or even how the money would be used (neither did Paulson). According to the Contra Costa Times newspaper, her "no" vote was based on the many phone calls she received objecting to bailing out Wall Street and her belief that it did not contain language that protected the specific homeowners who faced foreclosure. Paulson had done a poor job explaining the bill and she had done a poor job getting to the truth and severity of the situation. She voted a populist vote to keep her job. She is up for reelection this year.
The days following her "no" vote, Congresswoman Lee received just as many if not more angrier phone calls asking her what the hell she thought she was doing. In her effort to save those few foreclosures, she was in fact jeopardizing the entire economy. She changed her mind and voted for the second bill, which contained much more money, $150 billion more, and less restrictions on corporations to satisfy (read this as bribes) to get Republican votes. Maybe California State Treasurer, Bill Lockyear, did explain to her the importance of the bill, as she claims, or maybe he didn't. By that time it was known throughout California that Governor Arnold Schwarzenegger had alerted Secretary Paulson of California's dire credit crisis of not being able to get money for payroll and critical state services. Maybe Lee got a copy of Arny's urgent email? In any event, she changed her tune and her letter is full of rationale that makes her look like an economic hero to her constituents. More delusion.
Then, two weeks passed before Paulson and Bernanke did anything with the authority provided in the bill, now called a "rescue." Finally, they followed Britain's lead by injecting money in banks, but only half-hearted. Britain's action was a bank takeover that is forcing the banks to loan money that gets the credit market going again. Paulson's action was to hand over the money to selected banks and soft-sell the idea that banks need to start lending, at their convenience. So now, two weeks later, U. S. banks are still freezing credit by holding on to the money. They are still afraid to loan money and they have chosen to watch out for their own skins (company survival) instead of the survival of the U. S. economy. The downward spiral gets more complicated and more dangerous as each day passes. Even the "D" word, Depression with a capital "D," is being mentioned. Fear! Paul Krugman, Professor of Economics and New York Times Op-Ed columnist, reports that even the most knowledgeable market managers, the hedge fund managers, are bailing out because of fear.
As the 20-20 vision of hind-sight gets better, I'm thinking that Bush, Paulson and Bernanke are still hanging on to the delusional thinking of the old free market ideology; that companies, and banks specifically, can still self-regulate. They are just as afraid as everyone else is and they are sticking to their distorted, unbending beliefs. Even when Greenspan admits to Congress that he is "shocked" and "was mistaken" in his belief that the market would self-regulate, they are still hanging back on forceful action. Maybe what's unfolding points to the greatest illusion we've been sold that built the delusional rut we dropped into years ago; that markets should be free of government controls, that market forces would provide the self control - the supply-side economics (Reaganomics) sold to President Reagan by the Corporate Libertarian ideologues. The same economics that McCain believes in.
One thing for sure, 20-20 hindsight confirms that we are just chickens running around with our heads off. As for me, being completely in the dark on these complicated matters way beyond my knowledge, I just hope and pray that Warren Buffet, George Soros and T. Boone Pickens are right; that the market will come back with a vengeance in my life time. So, and since I bought at what I thought was a low point when the DOW was around 8,500, I'm holding on in the stock market and trying not to let my fears get to me. My wish, whether I gain anything or not, is that someone goes to jail over this. One or more of those big executives who made billions from proliferating those Credit Default Swaps would be a good place to start. Those executives who make billions from the bailout (rescue?) are next. But, lets put them in jail with just as much calmness, thoughtfulness and detachment as they used when they ripped us off. We should be determined, not emotional.