Democrats Create Instability

by Melissa Clouthier | June 24, 2010 1:27 pm

While they like to think of themselves as “nuanced”, they’re really unprincipled and thrown hither and thither by every trendy wind of expert opinion. This makes a mess for the Market and for the American people trying to make business decisions in an already unstable environment.

When people know what to expect, they can plan their economic lives accordingly. The problem in America right now, is that no one knows what to expect. For example this[1]:

Bank executives were panicking last night over a proposed fix to Title II of financial reform literally penciled in at the last minute. The fear is that that the proposed change to the orderly liquidation authority could leave banks on the hook for a possible wind-down of Fannie Mae and Freddie Mac that could cost as much as $400 billion. In the House counter-offer below, Fannie and Freddie are penciled in as falling under the definition of ‘financial company,’ meaning they could be resolved by the orderly liquidation process. This process is paid for by the sale of the failing company’s assets and/or through assessments on other financial companies, possibly putting the Street in line to pay for the liquidation of the troubled housing giants.

That would be an enormous added liability to the banks and could expose them to ratings agency downgrades and a big stock market sell-off. ‘It’s not clear to us how the markets and ratings agencies will react to this,’ one senior executive at a large Wall Street bank said last night. ‘But because this is a known quantity of potential liability there is a very real possibility that ratings agency’s will determine it is an immediate hit.’ Fannie Mae and Freddie Mac are much more likely to fail than any of the systemically important banks already a part of the liquidation authority, dramatically changing the equation for ratings agencies assessing the possible impact of financial reform. The exasperated executive added last night: ‘This is what happens when you have really important decisions made by the scribble of a pen.’ House counteroffer document

EXCLUSIVE II — Wall Street executives are complaining that the Obama administration has been largely absent from the financial reform conference process, failing to step up and push back on big issues such as the exact language on derivatives reform and the amendment from Sen. Susan Collins (R-Maine) on capital requirements.

The economy simply cannot recover when people are holding on to capital and sitting out and waiting and not taking risks. And that’s what’s happening everywhere. It’s distressing.

In this case, though, the government is considering something that would seem counter-intuitive. Why would the House even consider a bill that would essentially undo TARP? The banks, ostensibly, got stabilized. Why create instability?

Bottom line, the Democrats are clueless. From the average Dem in Congress to the one in the White House, the Democrats are confused, disengaged, out of touch and generally bumbling and making matters worse.

Indecision is a decision. Their decisions tend to be horrible, but their dithering is absolutely devastating.