Success or failure of bailout will be measured in years

Success or failure of bailout will be measured in years

Perhaps the best thing that could happen to Wall Street watchers this week is if they were bored.

No dramatic spikes up — and certainly not down — just steady as she goes.

At the close of a tumultuous week last week, members of he House gathered for a second time to vote on a bailout package for the nation’s troubled financial markets.

The bailout provisions of the bill were essentially the same as those the House rejected earlier in the week. The primary difference was that in the interim, Wall Street took a monumental plunge following Monday’s House vote. Then the Senate added some sweeteners that had little to do with the bailout and a lot to do with attracting votes. Finally, recalcitrant House members had either been frightened by what happened last Monday or frightened by what the administration and party leaders told them would happen if they rejected the bailout again.

Problem hits home

Back home the Man on Main Street or Joe Six Pack, depending on your preferred demographic, was beginning to see that what happens on Wall Street does matter. Credit was beginning to tighten, and when credit tightens, people can’t buy things, small businesses have difficulty making payroll and ... more people can’t buy things.

Congress followed an ugly course to pass what looks to most people like an ugly bill. The bailout that had gone down, 208 to 225 Monday, passed easily, 263 to 171, Friday.

Regardless of what happens in the short term, Stuart Eizenstat, former deputy secretary of the Treasury and now a partner at Covington & Burling, a Washington-based law firm, says, “No one will know if this works for several years.”

That’s not surprising. As we pointed out a couple of weeks ago, history now marks the beginning of the Great Depression with the stock market crash of Oct. 29, 1929. But on that day, people knew the market had dropped by 12 percent and that there were other troubling economic indicators, but they didn’t know what was to come over the next decade.

Some defining moments in history are recognized immediately. Others only become apparent with time.

Something must change

What can be safely said is that neither the administration nor Congress has any more trillion-dollar rabbits to pull out of the hat. The national debt is on its way to topping $11 trillion, nearly twice what it was when President Bush took office in 2001.

Regardless of who wins the Nov. 4 election, he is going to have to set a different course.

Borrow and spend has been stretched about as far as it can go.