This was not a good moment to be reminded that the separation of powers, and the hypersensitivity of the US Congress to public opinion, sometimes have drawbacks. It would have been better to pass an imperfect bailout plan promptly than come up with an improved version after a delay of days or, heaven forbid, weeks--always assuming that it is improved, in the end, and does eventually pass. (I say more about this in a recent column for National Journal.)
Whatever gets voted through is not going to be the last word on the subject in any case. Nothing like it. The plan will be revised on the run for months and maybe years. Prompt and basically sound action with broad political support was the order of the day. The country's politicians were incapable of it.
All the principals deserve a share of the credit for this truly astonishing shambles. The administration, in the first place, failed to prepare Congress for legislation of this kind. The possibility that something like TARP would be needed was easily foreseeable once Bear Stearns collapsed--which was months ago--if not long before. Yet the bailout plan was thrown together in a matter of hours and presented to Congress in an absurdly abbreviated form that said, in effect, authorize us to spend $700 billion as we see fit, or else. That was ridiculous--but no more ridiculous than embarking on a debate about the details of the plan, let alone about basic principles, as the credit system stood on the verge of complete breakdown.
It was an even graver mistake to take public opinion for granted. The implications of the meltdown for ordinary Americans were not promptly or persuasively spelled out. In another tactical miscalculation, the administration also talked up the scale of its rescue, the better to reassure the markets, rather than talking it down--as it could have done, by pointing out to the general public that the eventual cost of the action would likely be far less than $700 billion, and that there was at least the possibility that the taxpayer would come out ahead. This was a nicety left to the financial press to explore.
The president's intervention--his almost comical attempt to exercise leadership--was worthless, at best. When George W. Bush recommends a course of action, you can feel support for it leaching away as he speaks.
The presidential candidates and their respective surrogates utterly failed to respond to the urgency of the situation. They put politics first, using the crisis to underline their campaign talking-points and to put the other side at a disadvantage, rather than uniting to back a plan that both candidates appeared to support (well, I think they supported it: this was not always clear). If they had appeared alongside President Bush and had passionately affirmed the need for the plan without equivocation or political point-scoring, I dare say the outcome would have been different. It was more important to the Obama campaign to underline the failures of the Bush administration, and to associate McCain with that failure. It was more important to the McCain campaign to distance itself from the administration and find things in Obama's position to disagree with.
Facing a public unconvinced of the need for action and boiling with rage at the idea of using taxpayers' money to help the bandits of Wall Street, Congress too capitulated. By the time the vote came round, both party leaderships in Congress were backing the deal. Yet 133 Republicans and 95 Democrats voted against it (with 65 and 140, respectively, voting in favor). Many of the members voting against face difficult re-election battles in November.
The Republican leadership blamed Nancy Pelosi's stridently partisan speech recommending the measure for the strength of Republican opposition. On one level, this is a ridiculous complaint: in the end the Republicans are responsible for their own votes. Yet as I listened to Pelsosi's speech my heart sank. I do think it remarkably disingenuous to say (as Barney Frank, Larry Summers and many other Democrats subsequently did) that it would be outrageous for a Congressman to change his mind on the substance of a bill just because he was embarrassed by a speech. Good heavens, that would be to behave like...like a politician. Don't tell me a Congressman might sink that low.
Wavering Republicans, like wavering Democrats, needed cover to vote for a bill they did not like and that many of their constituents were objecting to. Pelosi chose to rub the Republicans' faces in the mess. Twelve votes needed to switch to get the thing done. If Pelosi had struck a bipartisan note, I bet the measure would have passed.
Who is to blame? All of the above. It is a comprehensive failure of leadership. And Washington wonders why much of the country holds politicians in contempt.
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