The Bailout Fails! And the NY congressional delegation voted on the wrong side!

The Bailout Bill failed and while the market plunged nearly 800 points, the sky is not falling. In fact, this is probably good news. Many well-regarded economists think the package, as it stood today, would actually make economic matters worse. Many also came up with better ways to spend $700 billion other than to hand it to Wall Street.

Here's James K. Galbraith:

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.

With this solution, the systemic financial threat should go away. Does that mean the economy would quickly recover? No. Sadly, it does not. Two vast economic problems will confront the next president immediately. First, the underlying housing crisis: There are too many houses out there, too many vacant or unsold, too many homeowners underwater. Credit will not start to flow, as some suggest, simply because the crisis is contained. There have to be borrowers, and there has to be collateral. There won't be enough.

Also, here's blogger and columnist David Sirota's take on the bailout. Sirota opinions are in the heart of the progressive movement and again I feel he's spot on:

How does handing over $700 billion to Wall Street help the economy any more than, say, handing over $700 billion to homeowners, or spending $700 billion on a full employment program? Until someone can answer that simple question, this bill simply should not pass as it is.

Below is how the New York delegation voted. We should be ashamed that we have such sheep in Congress. Rockland's representatives are highlighted in bold.

These representatives voted yay:
Ackerman
Arcuri
Bishop
Clarke
Crowley
Engel
Fossella
Hall
Higgins
Israel
King
Lowey
Maloney
McCarthy
McHugh
McNulty
Meeks
Nadler
Rangel
Reynolds
Slaughter
Towns
Velazquez
Walsh
Weiner

These representatives voted nay:
Gillibrand
Hinchey
Kuhl
Serrano

This bailout bill refills the pockets of fat-cat bankers, it doesn't help out the struggling middle class. It's a reverse Robin Hood situation, in fact. We've got Henry Paulson, George W. Bush, and John McCain saying, "Hey, pay off our mega-rich friends in the banking industry or we're gonna let the economy tank."

You know what this is: This is Bush's last ruse. His last grift before his Presidency is over. It's his last chance to fleece the American public. Bush, Cheney and their criminal cronies were about to "take the money and run," but we stopped them (although our Congresspersons in New York—with a few exceptions—did nothing to help.

Well, the American public, both progressives and real conservatives weren't going to put up with this blackmail. We're not mindless drones and we're not going to do the bidding of corporate America anymore. Let the stock market tank! The economy will tank even if we did pass the bailout.

Come back with a bill that puts money in the hands of the struggling middle class and not in the hands of the corporate elite and then we'll start talking.