The problem for Washington was that all of this seemed far from the daily lives of American citizens. Congressional leaders came hard up against the “no blank cheque” mentality of ordinary Americans already under pressure from the collapse of the housing market and the down-turn in employment figures. Barney Frank, chairman of the Financial Services Committee, put the situation succinctly: “It is hard to get political credit for something that has not yet happened.” This helped Republicans to argue that economic freedom means letting businesses go to the wall, conveniently ignoring the likely consequences. Congressmen of both stripes were also irritated by what they saw as Mr Paulson’s excessive demands for authority. Not everyone was attracted to the idea of Mr Paulson as de facto President.

A second aspect of the problem is that this is 2008, not 1929. Events in global markets move at internet speed. It took more than six months to pass the legislation to set up the Restoration Trust Corporation in 1989, and that was not an election year. This week alone has marked the bailouts of banks in six countries. It took seconds from the congressional vote for the Dow Jones to start falling. The fallout will be felt globally, but the world was looking to America for a solution. If America’s elected representatives do not realise the potential damage they have caused, they need to think again – fast.

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Filed under: * Economics, Politics • Economy • The September 2008 Proposed Henry Paulson 700 Billion Bailout Package • Politics in General

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