A Simple Q&A On The Financial "Crisis"

Is there a crisis?
For many in the banking industry, yes. For the economy as a whole, no.

Why is the administration shouting crisis?
There was a problem in the banking industry and they wanted legislative authority to address it. If they had asked for it in the normal way, the Congress would have viewed it as a normal, i.e. special interest bill favoring the constituents of the (right wing) Republicans. Then every centrist and (left wing) Democrat would have demanded his share of the pie as a price for going along. The administration hoped that by shouting crisis, they could get immediate action and forestall all that log-rolling.

What would have happened if they had succeeded?
They would have written a vague (3 page) bill that allowed great administrative latitude. The result would have been better than the (110 page) bill they had to come up with on a second try but neither version would have been better than not proposing any bill at all.
Having proposed action, any market adjustment that would have occurred in response to the "crisis" has been delayed while the players in the game wait for government money to play with.

What will happen if Congress can't agree on a bill?
If they give up and say "No Bill," the strong banks will gobble up the weak and the "crisis" will be over. If they hang on and keep debating for weeks, eventually the industry will give up and take care of the issue without help but it will take a long time to give up on the prospect of $700 billion.

What will happen if Congress does pass a bill?
The proponents hope that by promising to "do something" the panic will subside; they may be right. But it will take a long time for a bureaucracy to get set up and even longer to get started handing out money. It won't be long before Congressional oversight results in complaints of foot dragging, hasty decisions, bad personnel decisions (that has already started, even before the bill has passed), favoritism, and ultimately, graft and corruption. By then, all the administration actors will have left the scene so they can complain, along with everyone else, that the next administration has botched what was a well-designed plan. Meanwhile, these adverse results will be with us for years to come.