Update 2 (first update at bottom): I’m getting some information and indications that Dodd may not have been down with this, and that Frank may be leaking that the deal is done in an attempt to "make it so". Also Reid’s office is indicating that Reid is backing Dodd strongly. I’m still not optimistic since I still fear compromise towards the Frank bill, but there is some reason for hope, especially if Reid is backing Dodd on this. Of course, this could all be BS. I guess we’ll find out tomorrow.
I suppose expecting most Democrats to actually stand up to more than breeze’s worth of pressure and alarmism was too much to ask. According to The Hill, a "compromise" has been reached. Details are vague, there’s to be something to "protect taxpayers" but what it is isn’t clear. What is known is that changes to bankruptcy laws, which were in both the Dodd and Frank bills are out because Paulson wouldn’t agree. Of course, I’m sure it didn’t help that Obama on CNN today said that neither stimulus nor bankruptcy changes should be in the bill. When the leader of the party says it, it sort of undercuts your bargaining position.
This is the most unutterable bullshit I’ve seen in 5 years of blogging, and that’s saying something. A five year old child would understand that if someone is about to be completely destroyed unless you help them, they aren’t in any position to bargain. Yet somehow Democrats keep caving to Paulson. That means either it isn’t that much of a crisis, since Paulson seems to feel free to draw lines in the sand "ordinary people get no help if they go bankrupt, but we have to make sure banks don’t go bankrupt"; or if there is a crisis, then Democrats are the world’s worst negotiators.
I can hear people saying "why not both?" Yes, Democrats couldn’t negotiate giving away water to someone dying of thirst in the desert "I won’t drink that water unless you also give me a million dollars!"
"No, wait, a billion!"
But it’s also completely clear that there is no crisis that requires this bill to be resolved. Oh, there are things wrong with financial markets, but as every economist who isn’t paid to say otherwise, and even some of them has noted, it can wait and it doesn’t need this solution.
There is no crisis that can be solved by a lousy bill, and this is just a naked power and money grab by Paulson because he knows that Congressional Democrats are punks (that’s the polite word, use your imagination for the word I’m thinking).
I suppose after eight years of bills like the AUMF, the Patriot Act, FISA and so on we really couldn’t expect anything else. I doubt most of these folks will ever show a spine unless it’s their own skin on the line, and probably not even then.
At this point there appears to be little possibility of a good bill. The only thing to do now is to make House Representatives so scared of having to justify this bill to their constituents that there is a House revolt.
(Update: Reuters is reporting that Barney Frank is saying the deal is done. Oh, and for the record, I’m not down on Dodd about this. He’s got both the House and Obama right flanking him, and he’s in the more conservative chamber to begin with. Unless Reid is backing Dodd hardcore, I don’t see that he’s got much room to maneuver to get a good bill out of this. The only thing he could do is pull his bill off the table entirely, come out with something much more hardcore, and try for a showdown. But unless he’s got the caucus behind him, I don’t know if that will work. Still, if he tries it, he’ll have a ton of support from Main Street, indeed, he might become the most loved (and hated, in certain circles) man in America.)