Congressional leaders of both parties, Treasury Department Secretary Henry Paulson, and Federal Reserve Chairman Ben Bernanke just completed an emergency meeting to discuss a potential comprehensive legislative initiative to combat the subprime mortgage crisis. Brief comments were made by several legislators from both parties after the meeting tonight, and then Secretary Paulson made some brief, yet insightful comments. Neither campaign has yet commented on the meetings, and the political effect on the race is up in the air.
Paulson noted that the issue of bad debt related to the real estate mortgage industry is “systemic”, and expressed some optimism that a “comprehensive” solution would be reached shortly regarding the “root problem” of the financial crisis: “illiquid assets on financial institutions’ balance sheets”. Paulson hopes to get detailed legislation to Congress in a matter of hours. The aggressive move by Paulson, combined with McCain’s call for a similiar RTC-like solution today on the stump, the MFI Trust, put Obama and the Democrats on the defensive for the first time since the economic crisis broke on Sunday night.
While the Democrats in charge of Congress earlier today signaled their intent to adjourn without any legislative action to combat the roiling economic crisis, now congressional Democrats are being forced to at least hear Paulson out, as they did tonight. The next few days will decide whether a bipartisan legislative solution to the subprime mortgage crisis will be enacted prior to the election and which party holds the momentum in the race for President going into the first debate on September 26th.
Over the next few days, Obama and the Democrats are between a rock and a hard place – if they support a new RTC-like plan, the argument that the Bush Administration is a failure loses some luster and the markets may rebound strongly, potentially hurting Democratic electoral chances. On the other hand, if Obama and the Democrats are seen as blocking quick action on the financial crisis, voters may enact an electoral revenge. The Presidential campaign has heated up, and every moderate voter should be paying close attention to both campaigns on the preeminent issue this year.
Tags: Ben Bernanke, Henry Paulson, RTC-like, subprime mortgage crisis
Is it a good idea for the government to step in during these types of crises? Shouldn’t the market be able to handle things itself?
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