[See update below.]
From Joe Nocera's economics column in today's NYT:
Psychology always drives market behavior, and right now, the markets are desperately clinging to the idea that the Paulson plan is the only hope of regaining the confidence of borrowers, lenders and investors. Politics is politics, but the markets are not going to wait forever for a deal to be struck. In fact, I don't think they are going to wait much past the weekend. No deal, no credit markets. It's as basic as that.And if that happens, the consequences will be far more pressing than the failure of a Morgan Stanley or a Goldman Sachs. You won't be able to get a mortgage. Credit card rates will skyrocket. Businesses will be unable to expand and grow. Unemployment will rise.
Every part of our economy depends on the credit markets. I know you've heard it before, but it bears repeating. If we do not claw our way out of this crisis, the country will face a severe recession.
On Friday, the German finance minister, Peer Steinbrück, predicted that America would "lose its superpower status in the global financial system." He may well turn out to be right, but let's worry about that later, O.K.?
Right now, our elected representatives need to get down to business and agree to pass the Paulson plan. If they don't, they -- and we -- will live to regret it.
Latest report is that a Congressional deal may be announced Sunday night. I wish I knew whether that was a good thing or not.
UPDATE: Bill Kristol is awfully worried about Monday. Excerpt:
've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.
And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.
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MarcM,
One could also ask why liberal Democrats did nothing to address this mess, instead of contributing to it by thwarting any effort by Republicans or conservative Democrats to reform the Democrat-controlled institutions -- Fannie Mae and Freddie Mac -- that were as root a cause of this crisis as any other cause, and probably the single most fundamental cause.
One could also ask whether the best choice for president in such circumstances as we are in is a man with no executive experience and no economic expertise, save, that is, as a rubber stamp for precisely the sorts of policies that contributed the most to a mess that he is clearly unfit to clean up.
Excuse me for thinking that it's a mistake to believe that all it will take to get through what we must get though is switching to Pepsi from Coke.
Excuse me also for thinking that it's a mistake to believe that a Deus-ex-Machina-in-Chief is in the offing, as opposed to a machine politician in the presidency.
And for all of you Republicans who now have buyers remorse over Bush...why did you vote for him in the first place? He had ruined every company he had a hand in running, and now the economy of our nation has failed miserably under his watch.
Contrary to what you might think (if your sole source of information is the MSM) there are a large number of conservative Republicans on this site and throughout the country who (1) have never voted for this President, because (2) we saw what a cluster-you-know-what and a fraud he was from the get-go.
Myself very vocally and much included.
Following up on fbc's post, let me say again, as I have to say every couple of days here, that I am not now nor have I ever been a member of the Republican party, and I have never voted for George W. Bush -- one cannot have "remorse" about "buying" what one never "bought."
Rod is finally getting it I hope. Most Americans never look beyond our shores. Many of the international banks are teetering. Some of them are leveraged worse than any of our banks. We are a debtor country. We are at war in two countries and trouble is brewing elsewhere. A 20-30% hit to just our country would be toguh, but might be needed and tolerable if it produced positive long term results. Being seen as the culprit destroying the world economy, or not saving it when we could, greatly weakens our international position.
Steve
Any chance we can pin this on Jimmy Carter?
'cause you Bush fans who shouted all of us sensible people down the last eight years gotta look in the mirror.
The Dems have been insignificant the last eight years.
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